What does "ad valorem" mean in tariff terminology?

In tariff terminology, "ad valorem" refers to a duty that is calculated as a certain percentage of the value of the goods being imported. This method of determining tariffs is commonly used because it allows for adjustments in duty rates based on the actual value of each individual shipment. As the value of the goods increases or decreases, so does the amount of duty owed, which makes it a flexible approach for tariff assessments.

For example, if a good is valued at $1,000 and the ad valorem tariff rate is set at 10%, the duty would be $100. In contrast to a flat fee charge or a specific duty rate assigned to particular items (which does not change with value), ad valorem duties are directly tied to the value of the goods. This ensures that the tariff reflects the actual market value of the items being imported, facilitating fairer trade practices.

The concept of "no charge applied" is irrelevant in this context since ad valorem duties are specifically focused on the imposition of tariffs based on value.