7 Reasons Why EU Import Tariffs Matter for Your Business

If you are a business owner who wants to sell your products or services to the European Union (EU), you need to be aware of the EU import tariffs that may apply to your goods. Import tariffs are taxes that are charged by the customs authorities of the importing country on the value of the imported goods. They are one of the main tools that the EU uses to regulate its trade with the rest of the world and to protect its domestic industries from unfair competition.

In this article, we will explain what EU import tariffs are, how they are calculated, and why they matter for your business. We will also give you some tips on how to find out the tariff rates for your products and how to reduce or avoid them.

What are EU import tariffs?

EU import tariffs are part of the Common Customs Tariff (CCT), which is a uniform system of duties that applies to all goods entering the EU from non-EU countries or territories. The CCT is based on the Harmonized System (HS), which is a global classification system for goods developed by the World Customs Organization (WCO). The HS consists of 5,000 commodity groups organized in a hierarchical structure by sections, chapters, headings, and subheadings. Each product has a six-digit code that identifies its category, subcategory, and specific characteristics.

The EU further subdivides the HS codes into eight-digit codes called the Combined Nomenclature (CN), which adds EU-specific information and rules. The CN serves as the basis for the EU’s common customs tariff and trade statistics. The CN codes are then extended into 10-digit codes called the Integrated Tariff (TARIC), which incorporates all the trade policy and tariff measures applicable to specific products in the EU, such as tariff preferences, tariff suspensions, tariff quotas, antidumping duties, safeguard measures, prohibitions, restrictions, and controls.

How are EU import tariffs calculated?

The EU import tariffs are calculated based on the value of the imported goods and their CN or TARIC code. The value of the goods is usually determined by the transaction value, which is the price paid or payable by the buyer to the seller for the goods when sold for export to the EU. However, if the transaction value cannot be used or is not available, other methods can be applied, such as the deductive value, the computed value, or the fallback value.

The CN or TARIC code determines the rate of duty that applies to the imported goods. The rate of duty can be ad valorem (a percentage of the value of the goods) or specific (a fixed amount per unit of quantity or weight). The rate of duty can also vary depending on the origin of the goods, as some countries or regions benefit from preferential tariff arrangements with the EU. For example, goods originating in developing countries that are part of the Generalized Scheme of Preferences (GSP) enjoy lower or zero tariffs for certain products. Goods originating in countries that have free trade agreements (FTAs) with the EU also enjoy lower or zero tariffs for most products.

Why do EU import tariffs matter for your business?

EU import tariffs matter for your business because they affect your competitiveness, profitability, and market access in the EU. Here are some reasons why you should pay attention to them:

They increase your costs

Import tariffs increase your costs of doing business in the EU, as you have to pay them when you clear your goods through customs. Depending on the rate of duty and the value of your goods, this can represent a significant expense that reduces your profit margin.

They affect your pricing strategy

Import tariffs affect your pricing strategy in the EU, as you have to decide whether to pass them on to your customers or absorb them yourself. If you pass them on to your customers, you may lose some sales due to higher prices. If you absorb them yourself, you may lose some profits due to lower margins.

They create uncertainty

Import tariffs create uncertainty for your business, as they can change over time due to various factors, such as changes in trade policy, exchange rates, inflation, or market conditions. This makes it harder for you to plan ahead and budget for your operations in the EU.

They create barriers to entry

Import tariffs create barriers to entry for your business in the EU, as they make it more difficult for you to compete with local producers or other foreign suppliers who enjoy lower or zero tariffs due to preferential arrangements with the EU.

How can you find out the tariff rates for your products?

The easiest way to find out the tariff rates for your products is to use Access2Markets, which is an online portal provided by the European Commission that gives you access to information on tariffs, rules of origin, taxes, trade barriers, product requirements, and statistics for over 120 countries. You can use Access2Markets to search for your product by name, HS code, or CN code and get the relevant information for your export destination. You can also use Access2Markets to check if your product qualifies for preferential tariff treatment under the GSP or an FTA and what documents you need to prove its origin.

How can you reduce or avoid EU import tariffs?

There are several ways to reduce or avoid EU import tariffs, depending on your situation and the type of product you are exporting. Here are some options to consider:

Apply for tariff preferences

If your product originates in a country or region that benefits from preferential tariff arrangements with the EU, such as the GSP or an FTA, you can apply for tariff preferences and pay lower or zero tariffs for your product. To do so, you need to comply with the rules of origin that define how much processing or value addition your product needs to undergo in the country of origin and provide the necessary proof of origin, such as a certificate of origin or a self-declaration.

Apply for tariff suspensions

If your product is not produced or insufficiently produced in the EU and there is no EU interest in maintaining a tariff on it, you can apply for a tariff suspension and pay zero tariffs for your product. To do so, you need to submit an application to the European Commission through your national authorities and demonstrate that your product meets the criteria for a tariff suspension, such as economic benefit, non-sensitive nature, and non-availability in the EU.

Apply for tariff quotas

If your product is subject to a tariff quota, which is a limited quantity of goods that can enter the EU at a reduced or zero rate of duty, you can apply for a tariff quota and pay lower or zero tariffs for your product. To do so, you need to obtain a tariff quota certificate from the competent authorities of the exporting country or the EU and present it to the customs authorities of the importing country when clearing your goods.

Apply for trade defence measures

If your product is subject to trade defence measures, such as antidumping duties or countervailing duties, which are additional duties imposed on imports that cause injury to the EU industry due to unfair trade practices, you can apply for trade defence measures and pay lower or no additional duties for your product. To do so, you need to cooperate with the European Commission during its investigation and prove that your product is not dumped or subsidized or that it does not cause injury to the EU industry.

EU import tariffs are an important factor that you need to consider when exporting your products or services to the EU. They can have a significant impact on your costs, pricing strategy, uncertainty, and barriers to entry in the EU market. Therefore, you should always check the tariff rates for your products before exporting them to the EU and look for ways to reduce or avoid them if possible. By doing so, you can increase your competitiveness, profitability, and market access in the EU.

How EU import tariffs affect global demand

The European Union (EU) is one of the most open economies in the world, as around 71 % of its imports enter the EU at zero tariff. However, the EU also imposes tariffs on some products from some countries, depending on the trade agreements and preferential schemes that are in place. How do these tariffs affect the global demand for these products?

Tariffs and trade flows

A tariff is a tax that is levied on imported goods. Tariffs increase the price of imported goods, making them less competitive in the domestic market. Tariffs also generate revenue for the government that imposes them. Tariffs can have different effects on trade flows, depending on the elasticity of demand and supply for the imported goods. Elasticity measures how responsive the quantity demanded or supplied is to a change in price.

If the demand for an imported good is elastic, meaning that consumers are sensitive to price changes, then a tariff will reduce the quantity demanded significantly, and therefore reduce the imports of that good. On the other hand, if the demand for an imported good is inelastic, meaning that consumers are not very sensitive to price changes, then a tariff will have a smaller impact on the quantity demanded, and therefore have a smaller effect on imports.

Similarly, if the supply of an imported good is elastic, meaning that producers can easily adjust their production to price changes, then a tariff will reduce the quantity supplied significantly, and therefore reduce the exports of that good. On the other hand, if the supply of an imported good is inelastic, meaning that producers cannot easily adjust their production to price changes, then a tariff will have a smaller impact on the quantity supplied, and therefore have a smaller effect on exports.

Tariffs and global demand

The global demand for a product is the sum of the domestic demand and the foreign demand for that product. A tariff imposed by a large importer, such as the EU, can affect both components of global demand.

A tariff imposed by the EU can reduce the domestic demand for an imported product in the EU market, as explained above. This will lower the global demand for that product, ceteris paribus (all other things being equal).

A tariff imposed by the EU can also affect the foreign demand for an imported product, depending on how the tariff revenue is used by the EU government. If the tariff revenue is used to subsidize domestic production or consumption of a substitute product, then this will increase the domestic demand for that product in the EU market, and reduce the foreign demand for the imported product in other markets. This will also lower the global demand for that product, ceteris paribus.

However, if the tariff revenue is used to finance public spending or tax cuts that stimulate aggregate demand in the EU economy, then this will increase the domestic demand for all products in the EU market, including some imported products from other countries. This will increase the foreign demand for those products in other markets. This will partially or fully offset the reduction in global demand caused by the tariff on one product.

Examples of EU import tariffs

According to World Bank data , in 2020, the maximum rate of tariff imposed by the EU on any product was 74.90 percent. The simple average tariff across all products was 1.71 percent. The trade weighted average tariff was 1.48 percent. The total duty free imports in thousands of US dollars were 1,380,027,128.41 and duty free tariff line items share was 63.67 percent.

Some examples of products that faced high tariffs from the EU in 2020 were:

Dairy products: 42.10 percent
Sugar and confectionery: 31.40 percent
Beverages and tobacco: 20.60 percent
Clothing: 11.50 percent
Footwear: 10.80 percent

Some examples of products that faced low or zero tariffs from the EU in 2020 were:

Mineral fuels and oils: 0 percent
Pharmaceuticals: 0 percent
Machinery and electrical equipment: 1.80 percent
Vehicles and transport equipment: 3.30 percent
Plastics and rubber: 3.40 percent

These examples show that the EU imposes higher tariffs on agricultural products and lower tariffs on industrial products. This reflects both the protection of domestic farmers and consumers in the EU, and the trade agreements and preferential schemes that grant lower or zero tariffs to some developing countries or regions.

EU import tariffs can affect global demand for different products in different ways, depending on the elasticity of demand and supply, and the use of tariff revenue. The EU imposes higher tariffs on some products, such as dairy and sugar, and lower or zero tariffs on other products, such as mineral fuels and pharmaceuticals. These tariffs reflect the EU’s common trade policy and its trade agreements with other countries or regions.

References:

https://taxation-customs.ec.europa.eu/system/files/2018-03/amendment_ucc_20180302_en.pdf

http://www.avrupa.info.tr/fileadmin/Content/Downloads/PDF/Custom_Union_des_ENG.pdf

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A12019W%2FTXT%2802%29#d1e32-136-1

https://ec.europa.eu/eurostat/statistics-explained/index.php/International_trade_in_goods_-_tariffs
https://ec.europa.eu/eurostat/web/international-trade-in-goods/data
https://wits.worldbank.org/countrysnapshot/EUN/textview

https://taxation-customs.ec.europa.eu/customs-4/calculation-customs-duties/customs-tariff/eu-customs-tariff-taric_en
https://www.trade.gov/country-commercial-guides/eu-import-tariffs
https://trade.ec.europa.eu/access-to-markets/en/content/guide-import-goods
https://trade.ec.europa.eu/access-to-markets/en/content/tariffs-2