Non tariff barrier definition
A non tariff barrier is used to control and restrict specific cross border trade activities without the imposition of import duty. Trade activities affected by non tariff barriers can include import and export of goods, trade in services and investments. Countries can employ various non tariff barriers such as :
- Licensing controls
- Regulatory requirements
What are a few non tariff barrier examples to illustrate the above?
- Sanctions are effectively restrictions imposed on specific trade activities with defined entities. These bans will restrict trade activities but not necessary completely. These entities could be countries, cities, individuals or members of a trading community. Sanctions can be imposed by any country, however whether other countries respect these sanctions or not is often a decision driven by politics. For example, the United Nations had imposed sanctions against Iraq from 1990 to 2003.
- Embargoes can take many forms but in context of trade are usually interpreted as severe sanctions that completely block off trade activities with defined entities. Embargoes can include the establishment of a naval blockade and no-fly zone to cut off marine and air supply routes.
- Quotas can be implemented to restrict the import of specific commodities into countries. This is usually done to protect local industries. For example, there are import quotas placed on the import of rice into Thailand. This helps to ensure that the country remains an overall net exporter of rice.
- Licensing controls are perhaps the most common of all non tariff barriers. All countries in the world have some form of licensing control on specific products. For example, the import of certain chemicals into Singapore require the importer to have an approved import license. Some licensing controls are onerous and complex, requiring the licensee to hold specific qualifications and/or attend training. Such licensing frameworks may make it difficult or cost inefficient for small traders in the country to import certain commodities.
- Regulatory requirements are close related to licensing controls. However, regulatory requirements are usually several times more complex and/or time consuming. For example, the import of medical devices into India may require pre approval that takes several months to obtain.
Non tariff barriers can also take the form of levies, that effectively impose taxes on import of goods, which for most practical purposes function like a tariff.
As with tariff barriers, non tariff barriers are usually imposed on tariff lines in the country’s HS nomenclature. As such, traders have to carefully determine the correct HS classification numbers for their products. Free Trade Agreements or FTAs in force between countries also sometimes include negotiated clauses to remove non tariff barriers to facilitate trade between countries.
A final note
Traders expanding businesses overseas may find it difficult to navigate the complexities of non tariff barriers that have been implemented in foreign countries. Procedures implemented by local authorities may not be published online for easy reference and even if available, may not be in a language the trader understands. Hence, it is advisable to consult with an experienced Customs agent prior to shipping products overseas for the first time.