When a group of countries form a customs union

Customs union

A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...

 they must introduce a common external tariff

Tariff

A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

. The same customs duties, import quota

Import quota

An import quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time....

s, preferences or other non-tariff barriers to trade

Non-tariff barriers to trade

Non-tariff barriers to trade are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures and countervailing duties, which, although they are called "non-tariff" barriers, have the effect of tariffs once they are...

 apply to all goods entering the area, regardless of which country within the area they are entering. It is designed to end re-exportation

Re-exportation

Re-exportation can occur when one member of a free trade agreement charges lower tariffs to external nations to win trade, and then re-exports the same product to another partner in the trade agreement, but tariff-free. Re-exportation can be used to avoid sanctions by other nations...

; but it may also inhibit imports from countries outside the customs union

Customs union

A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...

 and thereby diminish consumer choice and support protectionism of industries based within the customs union

Customs union

A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...

.

The common external tariff is a mild form of economic union, but may lead to further types of economic integration. In addition to having the same customs duties, the countries may have other common trade policies, such as having the same quotas, preferences or other non-tariff trade regulations apply to all goods entering the area, regardless of which country within the area they are entering.

Important examples of common external tariff are that of the Mercosur

Mercosur

Mercosur or Mercosul is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay. Founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people,...

 countries (Brazil

Brazil

Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...

, Argentina

Argentina

Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...

, Venezuela

Venezuela

Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...

, Paraguay

Paraguay

Paraguay , officially the Republic of Paraguay , is a landlocked country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Paraguay lies on both banks of the Paraguay River, which runs through the center of the...

 and Uruguay

Uruguay

Uruguay ,officially the Oriental Republic of Uruguay,sometimes the Eastern Republic of Uruguay; ) is a country in the southeastern part of South America. It is home to some 3.5 million people, of whom 1.8 million live in the capital Montevideo and its metropolitan area...

) as well as the Common Customs Tariff of the Customs Union of Belarus, Kazakhstan and Russia

Customs Union of Belarus, Kazakhstan and Russia

The Customs Union between Belarus, Kazakhstan, and Russia came into existence on January 1, 2010. Belarus, Kazakhstan, and Russia are to go on with economic integration and were set to remove all customs borders between each other after July 2011....

.

See also

• Customs
  Customs
  Customs is an authority or agency in a country responsible for collecting and safeguarding customs duties and for controlling the flow of goods including animals, transports, personal effects and hazardous items in and out of a country...
  
  
• Harmonized System (World Customs Organisation)
  Harmonized System
  The Harmonized Commodity Description and Coding System of tariff nomenclature is an internationally standardized system of names and numbers for classifying traded products developed and maintained by the World Customs Organization , an independent intergovernmental organization with over 170...
  
  
• Combined Nomenclature (EU)
  Combined Nomenclature
  Council Regulation No 2658/87 of 23 July 1987, creates the goods nomenclature called the Combined Nomenclature, or in abbreviated form 'CN', established to meet, at one and the same time, the requirements both of the Common Customs Tariff and of the external trade statistics of the European...