Legal Definitions - CXT

CXT stands for Common External Tariff.

A Common External Tariff (CXT) refers to a unified system of customs duties, taxes, and levies that a group of countries (typically a customs union or a common market) collectively applies to goods imported from countries *outside* their economic bloc. This means that all member countries within the bloc impose the exact same tariff rate on a specific product, regardless of which member country the product initially enters. The purpose of a CXT is to create a consistent trade policy towards non-member countries and to prevent goods from entering the bloc through the member country with the lowest individual tariff and then moving freely to other member countries without further duties.

• Example 1: Automotive Imports in a Regional Bloc

  Imagine a hypothetical "Andean Customs Union" comprising five South American nations. These nations have agreed to implement a CXT of 15% on all passenger vehicles imported from countries outside their union. If a car manufacturer in Japan wants to export a new model to any of these five nations, that car will face a 15% tariff upon entry, whether it first arrives in Peru, Colombia, or Ecuador. Once the tariff is paid and the car clears customs in one member state, it can then be freely transported and sold within any of the other four member states without incurring additional tariffs.

  This example illustrates the CXT because all five member countries apply the identical 15% tariff rate to the Japanese-made cars, ensuring a uniform trade barrier against external imports and allowing free movement of the tariff-paid goods within the union.

• Example 2: Agricultural Products in a Common Market

  Consider the "European Economic Area" (EEA) which includes several European Union countries. The EU has a CXT for many agricultural products. For instance, if the CXT on imported oranges from Morocco is set at 10%, then whether those oranges are shipped directly to Spain, Germany, or Poland, they will all incur a 10% tariff upon entering the EEA. This prevents a situation where Morocco might try to ship all its oranges to, say, Portugal if Portugal had a lower individual tariff, and then have them distributed throughout the rest of the EEA without further duties.

  This demonstrates the CXT by showing how a single, harmonized tariff rate is applied by all member states of the EEA to agricultural goods originating from outside the bloc, maintaining a consistent protective measure for internal producers.

• Example 3: Electronics Manufacturing in a Developing Customs Union

  A newly formed "East African Customs Union" (EACU) consisting of Kenya, Uganda, and Tanzania decides to implement a CXT of 5% on imported raw materials for electronics manufacturing, such as microchips and circuit boards, coming from China. This means that a factory in Kenya importing microchips from China will pay a 5% tariff, and a factory in Uganda importing the same microchips from China will also pay a 5% tariff. This ensures that all electronics manufacturers within the EACU face the same cost for these imported components, fostering fair competition among them.

  This example highlights the CXT's role in creating a level playing field for businesses within the customs union by ensuring that all member countries apply the same tariff to specific raw materials imported from non-member countries.