Canadian Border Security (CBSA) Practice Exam

What is customs duty?

1. A tax on local goods

2. An indirect tax on international trade goods

3. A fee for crossing borders

4. A charge for customs documentation

The correct answer is: An indirect tax on international trade goods

The correct answer identifies customs duty as an indirect tax imposed on goods that are imported or exported during international trade. This tax is levied by the government when goods cross national borders, primarily to generate revenue and to protect domestic industries from foreign competition. Customs duties vary based on the type of goods, their value, and the country from which they are imported. It's important to note that customs duties play a critical role in international trade by influencing the prices of imported goods and, consequently, consumer behavior. This tax is an essential element of trade policy, serving both as a mechanism for government revenues and as a tool for regulating international commerce. The other options do not accurately describe customs duty. A tax on local goods would pertain to domestic taxation rather than the import/export context. A fee for crossing borders implies a direct charge for movement rather than a tax on specific goods, which misrepresents the nature of customs duties. A charge for customs documentation refers to administrative costs associated with processing import/export paperwork and does not reflect the tax aspect involved in customs duties.