Tariffs are a fact of life in international trade. Do you know how they work and what purpose they serve? Tariffs or customs duties are a tax on products purchased from abroad, and they are used by practically all countries. Tariffs are usually designed to collect revenue or to give a price advantage to a domestic product over an imported one. Two of our experts on tariffs and goods trade, Suja Rishikesh Mavroidis and Roy Santana, talk about how this tax works in practice. Learn more about tariffs and how to find them: https://www.wto.org/english/tratop_e/tariffs_e/tariff_data_e.htm In case you were wondering, the tariffs shown in this video are the average of all MFN applied rates around the world for each of those goods. Learn about MFN here: https://youtu.be/lZZxArfeol8. If you want to go deeper on this topic, here are a few additional explanations. The practical side of tariffs Tariffs can take many different forms, but the most popular by far are those expressed as a percentage of the product's value. These are called ad valorem duties and they are calculated using the customs value of the imported goods. However, tariffs can also be expressed as a "specific duty" (for example, a set amount per kilogram or other unit of measure). Countries sometimes also combine both types in compound or mixed duties. All countries structure and disseminate their tariff information based on a national or regional tariff nomenclature. Practically all of this work is based on the "Harmonized System" (HS), an international convention administered by the World Customs Organization. This is why knowing the exact "HS classification" of a product is typically the first step in determining the tariff to be paid. While practically all countries levy tariffs on imports, some of them also levy duties on the exportation of certain products. Tariffs at the WTO The first thing to know about tariffs in the WTO is that they are covered by the Most Favoured Nation treatment obligation: it means that, with some exceptions, a member of the WTO should charge the same tariff on a product for imports from all other WTO trading partners (check Let's Talk Most Favoured Nation to learn more). Beyond the MFN principle , which applies to import and export tariffs, Article II of the GATT 1994 provides that WTO members can set the maximum tariff level they can levy on imports from other WTO members. These "bound duties" become a commitment, or a promise made to all trading partners who are also part of the WTO, and they result from negotiations at the WTO. Bound duties vary considerably across countries, regions and from product to product. Although a WTO member cannot go above this promised level, it has the liberty of applying any level below this commitment. In fact, many of them apply tariff levels that are significantly lower than what they have promised. The duty levels used in practice are known as the MFN applied duties. As an exception, a WTO member may also apply even lower tariffs on products originating in certain countries (preferential duties) under certain conditions. Some of these exceptions include Article XXIV of the GATT 1994, which allows the establishment of regional trade agreements and customs unions, and the Enabling Clause, which allows for special and differential treatment for developing countries and least developed countries. Bound duties are contained in a member's "Schedules of concessions", known informally as a "Goods Schedule". These legal instruments are an integral part of the WTO Agreement, and they are one of the main tools used by the WTO to ensure transparency, security and predictability for world trade. Although practitioners typically refer to "the" Schedule of a member, these concessions and commitments can change over time and, as a result, they are often contained in several legal instruments that, together, set out the member's individual obligations at the WTO. Read more about the Goods Schedules and how they change over time: https://www.wto.org/english/news_e/news17_e/mark_27jul17_e.pdf Special thanks to … Our experts in this video: • Suja Rishikesh Mavroidis, WTO Market Access Director • Roy Santana, Counsellor at the Market Access Division … and to you. This video was produced by the WTO's audio-visual unit for information purposes, and for as wide dissemination as possible. Please share and recommend this video and others in this series from our social networks, or download it from this page (instructions near the playback window). PS: By the time you have watched this, the line Suja and Roy drew on the ground has long disappeared. We used (imported) biodegradable chalk.