The Various Business Tariffs
There are two main types of Tariffs available on the open market. These are the Fixed Tariffs and the Adjustable Rate Tariff. The Fixed-term Tariff lasts for a certain number of years whilst the Adjustable-rate Tariff allows the rate to be recalculated from time to time, depending on economic conditions. The most common of these two types of Tariffs is the Fixed-term, as it provides certainty and stability to businesses wishing to trade on the open market. However, many companies run on a margin and so need to know how much they can afford to risk on one particular tariff type.
When considering the various business tariffs
one needs to look closely at the rates of return, which will vary depending on the nature of the goods to be traded. These rates can be high when rates are low and vice versa. For instance, raw materials and foodstuffs tend to have fairly low fixed rate returns but are very variable when it comes to price. The variation could be driven by factors such as weather, the state of the economy, and even supply and demand.
The Fixed Tariff can prove extremely profitable
to those wishing to trade, as the rates are guaranteed. However, these same commodities, when traded in the Fixed-term tariff, can prove highly unprofitable for those wishing to trade. This is because the tariffs are static and cannot be adjusted. Whilst businesses can make use of the various business tariffs to minimize their risk by ensuring that the risk is as minimal as possible. However, the advantage of the Fixed-term policy is not always clear, as many questions surround its implementation.
For instance, one major con of the Fixed tariffs
is that they do not allow businesses to adjust the tariff according to market conditions. If, for instance, the price of steel increases, the business is unable to make the necessary changes. Unfortunately, with the unpredictable nature of the market, there are times when the market is very volatile and the effective utilization of the Fixed tariffs can prove problematic. Also, the Fixed tariffs were devised as a reaction to the increased complexity of the industry, with the introduction of new technology and international trade barriers significantly complicating the overall trading process. However, as time has progressed, these problems have become less pronounced.
As a result of the recent global economic crisis
there has been a consensus amongst policymakers that businesses must adopt more flexible trading processes to remain solvent. Consequently, in practice, various business tariffs have been adapted to better cater to the needs of businesses. For example, the Flexible Tariff allows flexibility in pricing, allowing a small business to compete on a much larger stage by being able to adopt more flexible pricing regimes. Similarly, the Index Tariff enables small businesses to be more volatile to market fluctuations by offering a greater degree of stability to the price of the key currencies. This, together with the varied and constantly changing circumstances that often characterize international trade, has made the Tariffs incredibly useful to businesses.
One of the most important aspects of the business tariffs
is the ease with which they can be implemented. These Tariffs need to be as easy to apply as possible, with the relevant documentation easily obtainable online. They should also be cost-effective, and should not force businesses to break their budgets to take advantage of them. Therefore, irrespective of the size of your business, or its current financial state, it is strongly advisable to implement business tariffs, as flexible pricing will ensure that you retain sufficient cash flow to continue with your day-to-day running.