A compound tariff is a customs duty that combines both an ad valorem tariff (percentage of the product’s value) and a specific tariff (fixed amount per unit, weight, or quantity). This hybrid approach allows governments to regulate trade while ensuring stable revenue collection. Compound tariffs are commonly applied to goods where both value and quantity impact pricing, such as textiles, automobiles, and agricultural products.
How Compound Tariffs Impact Logistics
For logistics professionals, compound tariffs complicate cost calculations, pricing models, and customs documentation. Since they involve both value-based and quantity-based fees, accurate valuation, weight measurement, and classification are essential for proper customs compliance.
Examples of Compound Tariffs in Action
- U.S. Tariffs on Imported Footwear – The U.S. applies a 5% ad valorem tariff + $1 per pair on specific imported shoes. A shipment of 1,000 pairs valued at $50,000 would face:
- Ad valorem tariff: 5% of $50,000 = $2,500
- Specific tariff: $1 × 1,000 pairs = $1,000
- Total tariff cost: $3,500
- EU Tariffs on Textiles – The European Union imposes a 12% ad valorem tariff + €2 per kilogram on certain fabric imports. A 200 kg shipment valued at €5,000 would incur:
- Ad valorem tariff: 12% of €5,000 = €600
- Specific tariff: €2 × 200 kg = €400
- Total tariff cost: €1,000
- India’s Tariffs on Automobiles – India applies a 10% ad valorem tariff + ₹50,000 per vehicle on imported cars. A shipment of 50 cars valued at ₹100 million would be taxed as follows:
- Ad valorem tariff: 10% of ₹100M = ₹10M
- Specific tariff: ₹50,000 × 50 cars = ₹2.5M
- Total tariff cost: ₹12.5M
Managing Compound Tariffs in Logistics
To minimize costs and streamline trade operations:
- Accurately Declare Both Value and Quantity – Ensure proper classification to calculate the correct tariff amount.
- Leverage Trade Agreements – Some FTAs offer reductions on either the ad valorem or specific portion of a compound tariff.
- Optimize Shipment Size and Value – Adjust quantities or shipment values strategically to reduce overall tariff costs.
