Tariff Concession
Tariff Concession A commitment by a country to reduce or eliminate import duties on specific products during trade negotiations. These are formalized in schedules of concessions under WTO agreements or bilateral/regional trade deals.
Latest Update (February 2025)
Recent WTO ministerial meetings have focused on reviving multilateral tariff concessions for environmental goods as part of climate negotiations, though differences remain on product coverage.
Read WTO Press ReleaseWhat It Means
A tariff concession is a promise that a country makes during trade negotiations to lower or remove its import taxes on specific products. Think of it as saying, "We'll charge less (or nothing) to import your goods," in exchange for similar benefits from trading partners. These mutual promises, once formalized, help reduce barriers to international trade.
Key Concepts
Reciprocity
Trade concessions operate on a give-and-take basis, with countries trading tariff reductions in areas of mutual interest
Binding Commitments
Once formalized, concessions become legally binding obligations under WTO rules or trade agreements
Product Specificity
Concessions apply to particular products, defined by tariff line codes, rather than blanket reductions
Negotiated Access
Provides more predictable market access as countries can't arbitrarily increase tariffs on concession items
Types of Concessions
Tariff concessions take several forms:
Multilateral (WTO) Concessions
- Made during global trade rounds (e.g., Uruguay Round)
- Apply to all WTO members equally (MFN principle)
- Recorded in each country's Schedule of Concessions
- Cover thousands of product categories
Bilateral/Regional Concessions
- Made between specific countries in FTAs
- Apply only to participating agreement members
- Often deeper cuts than multilateral concessions
- May include phase-in periods for sensitive items
Important: Modified concessions require compensation through reduced tariffs on other products to maintain the overall balance of concessions.
Historical Timeline
GATT Signing
First multilateral tariff concessions exchanged among 23 founding contracting parties
Kennedy Round Launched
First major post-GATT negotiating round, resulting in average 35% tariff concessions
Uruguay Round Begins
Most ambitious negotiating round covering tariffs and many other trade issues
Uruguay Round Completed
Significant tariff reductions averaging 40%, establishment of WTO
Doha Round Launched
Focused on development needs of poorer countries, still not fully concluded
Bali Package Agreement
WTO Trade Facilitation Agreement includes some tariff concessions on agricultural products
Real-World Example
Case Study: Tariff Concessions in the U.S.-Korea Free Trade Agreement (KORUS)
Background
The U.S.-Korea Free Trade Agreement (KORUS), implemented in 2012, provides a practical example of how tariff concessions work in a bilateral context. Before KORUS, Korea maintained relatively high tariffs on many U.S. exports, particularly agricultural products and automobiles.
Key Tariff Concessions
| Product | Pre-FTA Tariff | Concession | Phase-In Period |
|---|---|---|---|
| Automobiles (Korea) | 8% | 0% | 5 years |
| Beef (Korea) | 40% | 0% | 15 years |
| Trucks (U.S.) | 25% | 0% | 10 years |
| Electronic Equipment (Both) | Various (0-8%) | 0% | Immediate |
Negotiation Balance: The concessions were carefully balanced to provide mutual benefits, with some Korean high-tariff sectors (like beef) receiving long phase-in periods in exchange for immediate access to other U.S. markets.
Implementation Mechanism
Legal Implementation
Each country codified the agreed concessions in their tariff schedules through domestic legislation: the U.S. through the KORUS Implementation Act and Korea through its Customs Act amendments.
Administrative Process
Customs agencies in both countries programmed their systems to recognize imports under KORUS, requiring importers to provide certificates of origin to qualify for preferential rates.
Business Impact
U.S. Auto Parts Supplier
Midwestern Auto Components, a U.S. manufacturer of specialized vehicle parts, experienced the following changes after KORUS tariff concessions were implemented:
- Korean tariffs on their products dropped from 8% to 0% over 3 years
- Export sales to Korea increased by 35% within 4 years
- Company established a Korean sales office and distribution center
- Hired 28 new employees at U.S. manufacturing facility
Korean Electronics Manufacturer
Seoul Electronics, a Korean producer of consumer electronic devices, benefited from KORUS concessions through:
- Immediate duty elimination on components imported from the U.S.
- 6% reduction in manufacturing costs for U.S.-bound products
- Increased competitiveness against Japanese and Chinese competitors
- 15% higher U.S. market share within 5 years of implementation
Renegotiation Experience
In 2018, the U.S. and Korea renegotiated certain aspects of KORUS, demonstrating how tariff concessions can be modified:
Concession Modification
Korea agreed to double its import quota for U.S. automobiles that meet U.S. (rather than Korean) safety standards from 25,000 to 50,000 vehicles per manufacturer per year
Concession Extension
The U.S. agreed to extend the phase-out period for the 25% truck tariff from 2021 to 2041, maintaining protection for U.S. manufacturers for an additional 20 years
This case study illustrates how tariff concessions work in practice: they're negotiated reciprocally, implemented gradually, create tangible business opportunities, and can be modified when necessary through mutual agreement to address changing economic and political conditions.
Concession Impact Calculator
Calculate potential duty savings from tariff concessions for your imported products.
Calculate SavingsNeed help understanding tariff concessions?
Our trade policy experts can help you navigate complex tariff schedules and identify opportunities in trade agreements.
Consult a Trade Expert