countervailing duty

countervailing duty, tariff or tax levied to neutralize the unwanted or unintended effects of other duties. When domestic producers are subject to sales taxes or turnover taxes (levied on gross sales), countervailing tariffs are sometimes imposed on imported goods from producers who are not subject to such taxes in their own countries. Similarly, by international agreement, one country may tax the domestic production or sale of goods in order to maintain the competitive position of foreign producers subject to its import tariffs. Alternatively, countervailing duties may be used to protect one set of domestic producers from another set.

The term is sometimes interpreted as applying to customs duties imposed for the prevention of unfair competition by foreign rivals—many of whom benefit from a strongly organized industry, unduly cheap exchange rates, sweatshop labour, or subsidies. Such duties are commonly known as antidumping duties. Countervailing duties are allowed under Article VI of the General Agreement on Tariffs and Trade, a trade agreement administered by the World Trade Organization.