DEFINITION of Duty
A duty is either a form of taxation or the responsibilities that are held by an individual. A duty can be a tax levied on certain goods, services or transactions. Duties are enforceable by law and are imposed on commodities or financial transactions instead of individuals.
Duties can also (separately) refer to the obligation of a person in authority such as a fiduciary to fulfill the responsibilities of his or her position.
BREAKING DOWN Duty
In the corporate context, duty can refer to the fiduciary duty that the chief executive officer of a company holds with regard to the company's shareholders. This means that any course of action the CEO takes should be in the best interests of the shareholders. For example, a CEO's duty can include weighing whether or not a merger deal with a rival would provide adequate shareholder value.
How Duty Affects International Commerce
A customs or import duty is a tariff or tax imposed on goods that are transported across international borders. The intent of this form of duty is to provide a form of commerce protection for each country's jobs, economy, environment and other interests by controlling the influx and outflow of merchandise. Duties may be imposed on restrictive and prohibited goods that are shipped in and out of a country.
The customs duty rate is a percentage determined by the total purchased value of the goods paid for in another country. The quality, size or weight of the product are not determining factors. The Harmonized Tariff System of the United States is used domestically as a reference for applicable tariffs on merchandise imported to the country.
This form of duty can be revoked in certain situations such as an airport's duty-free shop. When customers patronize a duty-free shop, commodities that are usually taxed such as cigarettes and alcohol will not have a duty levied on them. Foreign visitors will then be able to purchase the goods at a lower price compared to domestic citizens. There are limits and guidelines for shopping duty-free. The products purchased are intended to be taken out of the country where they were bought. Shoppers may be required to show their passports when making duty-free purchases.
Travelers who make duty-free purchases may be required to declare to customs officials what they bought once they arrive back in their respective home countries. They may be required to show receipts for the purchases. Monetary limits on the value of the duty-free purchases may be set. If the value exceeds the threshold, tariffs and local taxes may be imposed on the purchases.