GLOSSARY

Preferential Duty Rates

Reduced tariff rates that one country gives to another, often as part of a trade agreement.

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What is Preferential Duty Rates?

A Preferential Duty Rate (PDR) is a reduced tariff rate of duty. It’s usually even lower than the normal Most Favored Nation (MFN) rate that’s applied to goods imported from countries with that status. PDRs are normally used to promote investments and trade between countries.

There are several, different types of PDRs, including:

Free trade agreements (FTAs): Agreements between two or more countries that lower or remove tariffs on goods traded between them.
Preferential trade agreements (PTAs): Agreements between two or more countries that lower or remove tariffs on goods traded between them, but are not as comprehensive as FTAs.
Generalized System of Preferences (GSP): A program allowing developing countries to export specific goods to developed countries at preferential rates.

To claim a PDR, the importer must typically provide proof of origin for the goods. Proof of origin is documentation that outlines that the goods were produced in the country that’s eligible for the PDR. These tariffs can be set between whatever the established MFN tariff is and 0%.

U.S. Tariff Rate Quotas and How To Take Advantage of Them - USA Customs Clearance

Taxes on Imported Goods: A Guide to Tariffs, Duties, and More - USA Customs Clearance

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