Legal Definitions - preferential tariff

PREFERENTIAL TARIFF

A preferential tariff is a special tariff rate given to certain countries or products as a result of a trade agreement or other special arrangement. This rate is lower than the standard tariff rate and is designed to encourage trade between the countries involved.

For example, let's say Country A and Country B have a trade agreement that includes a preferential tariff on oranges. The standard tariff rate for oranges is 10%, but under the preferential tariff, oranges from Country B are only subject to a 5% tariff when imported into Country A. This makes it more attractive for businesses in Country A to import oranges from Country B, which can help to increase trade between the two countries.

Another example of a preferential tariff is the Generalized System of Preferences (GSP) program, which provides preferential tariff rates to developing countries on certain products when they are exported to developed countries. This program is designed to help promote economic growth in developing countries by making it easier and more affordable for them to export their goods to other countries.

A preferential tariff is a way to encourage trade between countries by making it more affordable for businesses to import and export goods. By offering a lower tariff rate on certain products or for certain countries, it can help to increase trade and promote economic growth. The examples illustrate how preferential tariffs work in practice and how they can benefit both developed and developing countries.