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Exhibit 4.1: Assume that the United States imports automobiles from South Korea at a price of $20,000 per vehicle and that these vehicles are subject to an import tariff of 20 percent. Also assume that U.S. components are used in the vehicles assembled by South Korea and that these components have a value of $10,000.Refer to Exhibit 4.1. Under the Offshore Assembly Provision of U.S. tariff policy, the price of an imported vehicle to the U.S. consumer after the tariff has been levied is:
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Assume that the United States imports televisions from Taiwan at a price of $300 per unit and that these televisions are subject to an import tariff of 25 percent. Also assume that U.S. components are used in the televisions assembled by Taiwan and that these components have a value of $100. Under the Offshore Assemble Provision of U.S. tariff policy,the price of an imported television to the U.S. consumer after the tariff has been levied is $375
To protect domestic producers from foreign competition, the U.S. government levies both import tariffs and export tariffs.
With a compound tariff, a domestic importer of an automobile might be required to pay a duty of $200 plus 4 percent of the value of the automobile.
With a specific tariff, the degree of protection afforded domestic producers varies directly with changes in import prices.
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