COMMERCIAL

POLICY
INSTRUMENTS
SUBMITTED TO:
DR. VANITA AHLAWAT

SUBMITTED BY:
NIDHI AGRAWAL
MBA GEN. 1(B)
190101010042
 COMMERCIAL POLICY………

MEANING:

Commercial policy is the part a country’s economic policy, that is related with measures and
instruments that influence exports and imports, either through quantities, prices or which goods will
be traded or not. Commercial policy consists of tariffs and other restrictions on international trade.

Governments can impose restrictions on trade:

- to protect local employment
- to protect local industries
- to reduce commercial deficit
- because of political pressure
FEATURES/OBJECTIVES……

The features or objectives of commercial policy are as follows:

 To improve & extend international aid/co-operation through the exchange of goods &
making a contract with different countries.
 To create an international market for our local products to increase export.
 To participate in the international trade fair to introduce our local products through
govt, or private initiatives.
 To take proper steps for promoting the export of non- traditional items.
 To launch publicity campaigns for creating a new market for traditional products
 To create a favorable environment for foreign trade/exchange.
 To provide export facilities to exporters.
 To reduce the import of luxurious goods.
 To import raw materials, machinery, parts & accessories necessary for producing goods.
 To promote the establishment of export-oriented industries.
 To meet the need for essential goods.
 To encourage govt. & private sector industry for foreign trade.
 To stabilize the foreign exchange rate.
 To promote the export of man-power, to increase the earning of foreign currencies.
 Encourage domestic and foreign investment in overall industrial development
 MEASURES OF COMMERCIAL
POLICY………..

There are various measures for commercial policy. The two main types of
measures are:

MEASURES

NON-
TARIFF
TARIFF
MEASURES
MEASURES
 TARIFF MEASURES…
A tariff is a tax imposed on product that move across different
national boundaries . The most important form of trade is the
heavy taxes or custom duties on import so as to discourage their
entry into the home market. Tariffs are among the oldest form
of government intervention in the economic activity. There are
several types of tariff barriers that can be imposed by the
government as explained further.
1. According to origin and destination of
goods.

a. Export duty: It is a tax levied on those goods which are being sent out of the
country of origin. It is imposed by the country where production takes place.
b. Import duty: It is tax levied on the goods which are entering into the
country and produced in some other country. It is imposed by the country
for which goods are designated.

c. Transit duty: This type of duty is levied on commodities that originate in

one country, cross another, and are consigned to a third.
2. According to Quantification.

a. Specific duty: it is a flat sum charged on the weight or volume or

item count or quantity of a commodity irrespective of its monetary
value or market price. It is collected on physical unit of a
commodity.

b. Ad-valorem duty: It is charged on the monetary value of the goods

instead of a flat sum on a physical units as in case of specific duty. It
is generally a fixed percentage of the invoice value of goods traded.
 Compound duty: A tariff is referred to as compound duty when the
tax is levied on a commodity both s per physical unit and monetary
value.
 3. According to their Functions.

a. Revenue tariff: It is levied by the government of the nation to earn

revenue.
b. Protective tariff: It is levied to protect the domestic product from
the foreign competition.
c. Anti dumping duty: Dumping is defined as a situation when the goods are
exported by a country to another country at a price lower than its normal
value to offset these dumping effects, duty are levied in addition to normal
duties.
4. According to Trade relations.

a. Single column tariff: In this, one rate is applicable to commodity and the
same rate is levied on that commodity irrespective of the fact from which
country goods are being imported.
b. Double column tariff: In this, two rate are applicable for the same
commodity; one is the high rate and the other is the low rate. Low rate
applicable to the friendly country and high rate to the all other countries.
c. Triple column tariff: In this three different rates of duties are fixed.
NON- TARIFF
MEASURES……
Non tariff barriers are another way for a nation to control the amount
of trade that it conducts with other country. A non tariff barrier is
any barrier other than a tariff that raises an obstacle to free flow of
goods in overseas market. This barrier effects the quantity of
import.

There are various types of non-tariff measures or barriers. These are

as follows:
 1. Quota

A quota is a maximum limit specified either in terms of value or physical units on imports or
exports of a given product for a certain period of time. Such quotas are enforced through
licenses issued to either exporters or importers and may be applied to trade with some specific
countries or for some specific products.

2. Licensing
It is an alternative to the quota system. It also restricts the total quantity that can be imported.
But here, an importer has to obtain a license from the government before importing the goods.
License is a permission granted by the government to import certain type of goods into the
country.
3. Consular formalities

Some importing countries demand that the shipping documents must be accompanied by
some consular documents like import certificates, special invoices approved by the
consular.

4. Custom regulation
Some countries have some cumbersome custom regulations and border procedures for
the import of certain products especially medicines, drugs, minerals and precious
metals.
5. State trading

In this, import-export activities relating to some commodities are carried by

government or its agencies only. This agencies carry out international trade strictly
as per government policies. Individuals and firms are not directly permitted to
directly deal with the customer in another country.

6. Embargo
It is a government order that restricts commerce or exchange with a specified
country. It is usually created as a result of unfavorable political or economic
circumstances between nations.
7. Product testing and standardization

Standards are set for health, welfare, safety, quality , size, and measurements
which have to be complied with in order to enter a foreign market. All
product must meet the quality standards of the domestic country before they
are offered for the trade.
8.Miscellaneous non-tariff barriers

Such barriers include prior import duties such as deposits, import restrictions due
to environmental regulation , technical and administrative administration ,
canalization of imports of some commodities, provision of subsidies to domestic
industry etc. All such measures act as a non-tariff barriers as they restrict the
free flow of goods and services between countries.