Anshul Sharma

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What are tariff barriers in international trade?

A tariff is a tax a government charges on goods coming into its country. Your buyer doesn't pay it up front, but it's added to the landed cost of your product, which means your price in that market goes up.

Governments do this to protect local industries from cheaper imports, and sometimes just to collect revenue. Either way, the exporter feels it first.

A practical example: Say you're shipping cotton fabric to Brazil. Brazil charges a 20% import duty on that category. Your buyer clears customs, pays the duty, and suddenly your fabric costs 20% more than it did when you quoted it. That difference either comes out of your margin or makes you more expensive than local suppliers.

What are the main types of tariff barriers?

Here are the main types of tariff barriers you'll come across.

This is the most common type. The duty is calculated as a percentage of your product's declared value. So if a country charges 15% ad valorem on electronics and you're shipping a consignment worth $10,000, you owe $1,500 in duty.

Here, the tariff is a fixed amount per unit, regardless of the product's cost. A country might charge $2 per kilogram of imported coffee beans, whether that coffee is worth $5/kg or $15/kg. This can hit lower-value products harder.

This is a combination of both. You pay a percentage of the product's value, plus a fixed amount per unit. Luxury goods often attract compound tariffs, since governments want both a revenue cut and a price deterrent on high-value imports.

For example, a country might charge 10% of the invoice value plus $5 per kilogram on imported chocolates. So a 100 kg shipment worth $2,000 would attract $200 (10% ad valorem) plus $500 (specific duty), bringing the total tariff to $700.

Protective tariffs are designed to make foreign goods expensive enough that local buyers stick to domestically produced alternatives.&nbsp;

Revenue tariffs are less about blocking trade and more about collecting income for the government.&nbsp;

The duty on petroleum imports in many countries, for instance, isn't meant to stop imports; it's just a steady revenue source.

A non-tariff barrier is any restriction on trade that isn't a tax. It could be a rule, a standard, a quota, a licensing requirement, or a procedure that governs what enters or leaves a country. Unlike a tariff, there's no clear number attached to it. You just find out you can't sell there, or that selling there costs far more than you planned.

Countries use these measures for all kinds of reasons: food safety, environmental protection, national security, and public health. Some of those reasons are completely legitimate. But governments don't always draw a clear line between protecting public health and protecting local industry, and for an exporter, the impact is the same either way.

A practical example: An Indian food exporter shipping to the EU, for instance, may need to obtain FSSAI-aligned documentation and pass pesticide residue checks before the goods are cleared.

What are the main types of non-tariff barriers?

Non-tariff barriers show up at different points in the export process. Here are the main types to know:

A quota is a hard limit on how much of a product can enter a country within a given period. If you're exporting garments to a country that allows only 500,000 units of a particular fabric category per year, and that limit is reached in Q2, your Q3 shipment will wait until the next cycle.

Some products need government approval before they can be imported. Your buyer must apply for and obtain that license before your shipment can clear customs. For exporters, this adds an unpredictable step to the timeline that's entirely outside your control.

These are product standards, testing requirements, and labeling rules set by the destination country. Your product has to meet them before it's allowed in. An Indian electronics exporter selling to Europe, for instance, needs CE certification confirming the product meets EU safety and electromagnetic standards. Without it, the shipment doesn't clear.

These apply mainly to food, agricultural products, and anything involving animals or plants. The destination country inspects for pesticide residues, disease, contamination, or non-compliance with its food safety standards. Indian basmati rice exports to the EU, for example, are regularly tested for pesticide levels, and shipments that don't pass get rejected at the port.

When a government financially supports its own producers, it indirectly makes imports less competitive. If a country subsidizes its wheat farmers, locally produced wheat is cheaper on the shelf than anything you ship in, even if your product is genuinely better. There's no rule blocking you, but the economics work against you.

Lengthy documentation requirements, inconsistent inspections, and slow clearance processes delay shipments and add costs you didn't budget for. A few extra days at the border means storage charges, missed delivery windows, and buyers who start looking elsewhere.

What is the difference between tariff and non-tariff barriers?

Both restrict trade, but they work differently and require different responses from exporters. Here's a side-by-side look at how they compare in practice.

For small exporters, non-tariff barriers tend to be the harder problem. A tariff rate is published, and you can price around it. A certification requirement you didn't know about, or a quota that filled up before your shipment arrived, is much harder to plan for.

How do tariff and non-tariff barriers affect international trade?

Trade barriers do more than slow goods at the border. They affect your pricing, your cash flow, and sometimes your ability to enter a market at all

How can exporters navigate barriers to global trade?

Here are a few ways in which exporters can plan ahead and navigate barriers to global trade:

Research the destination market requirements before exporting

Partner with customs brokers or freight forwarders

Use digital tools for tracking and payments

Simplify your cross-border payments with Skydo

Navigating trade barriers already takes enough bandwidth. Skydo handles the payment side so you're not also chasing transfers, decoding fee structures, or waiting on settlements while your shipment clears.

<a href="https://www.skydo.com/">Explore how Skydo works for Indian exporters →</a>

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Export incentives are benefits, refunds, credits, and concessions given by the Indian government to exporters to make their goods and services more competitive in global markets.

Exporters end up paying several embedded taxes and duties during manufacturing or distribution that don't get refunded through regular GST or customs channels. Things like tax on electricity, fuel cess, and other hidden state and central levies. Export incentives compensate for these, so you keep a healthy margin while offering attractive pricing to your global buyers.

Here's a quick glance at the benefits covered across these programs:

What types of export incentive schemes can Indian exporters claim

Here’s an overview of the major export incentive schemes that Indian exporters can claim a refund on:

RoDTEP (Remission of Duties and Taxes on Exported Products)

The <a href="https://www.skydo.com/blog/rodtep-scheme-guide">RoDTEP scheme</a> remits central, state, and local taxes not refunded under any other program. That means you can claim a refund for electricity duty, fuel tax, and stamp duty on documentation.

You get transferable electronic scrips on the ICEGATE portal as a refund. If this is new to you, think of scrips as coupons that you can redeem to get a discount on future import duties. Or you can transfer it to a fellow importer if you don’t need it.

The scheme covers 8,555 tariff lines and the remission rate can range from 0.3% to 4.3% of the FOB value depending on your 8-digit HSN code.

With this scheme, you can claim a refund for customs duties on imported raw materials used in manufacturing an export order. Like a leather bag exporter claiming a refund for customs duties on imported leather.

The refund amount depends on the All Industry Rates (AIR), which are fixed percentages set by the government for various product categories.

AIR is calculated on the Free On Board (FOB) value, which is the price of goods at the time of loading them onto the vessel minus insurance and freight. However, if it covers less than 80% of your actual duties paid, you can apply for a Brand Rate.&nbsp;

Brand rate is a customized refund calculated for your business. It is calculated based on your evidence, such as duty payment receipts and consumption data. If approved, it can increase your reimbursement to 6–8%, but you must diligently maintain production and consumption records for the next five years to support your claim during audits.

Here’s an example of AIR and brand rate to make it simpler for you: An industrial machinery manufacturer exports an order with an FOB value of Rs.10 lakh. The AIR is 2%, so the exporter will receive a refund of Rs. 20,000. However, they paid Rs. 50,000 as customs duties on importing high-value steel and electronic controllers; AIR only covers 40% of the duties paid. The exporter is eligible for a brand rate, and after submitting all the verified receipts, he gets a refund of Rs. 50,000, 5% of the FOB value.&nbsp;

Export Promotion Capital Goods (EPCG) Scheme

The <a href="https://www.skydo.com/blog/export-obligation-period">EPCG</a> scheme is for manufacturers to import capital goods, like advanced machinery, computer systems, and software at 0% customs duty. The cost of high-tech equipment reduces, and businesses can upgrade their production quality and competitiveness simultaneously.

But there is one condition: the manufacturer must export goods worth six times the duty saved within six years.&nbsp;

You can take advantage of duty-free imports of raw materials, packaging, and fuel for manufacturing export products with this scheme. The Standard Input-Output Norms (SION) calculates the exact amount of raw material needed for an export order that you can claim duty-free.

Unlike the Duty Drawback scheme, which is a post-export refund of duties already paid, Advance Authorization is a pre-import exemption. Your initial product costs reduce, and you’re left with more working capital.

The IES provides subsidized interest rates on<a href="https://www.skydo.com/blog/pre-shipment-credit"> pre-shipment credit</a> and post-shipment loans for MSME exporters.

Latest Update: Under the government’s recently launched<a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2199733&amp;reg=3&amp;lang=1"> Export Promotion Mission</a> (EPM), eligible MSMEs can now receive a 2.75% interest subvention on their export credit costs.

The goal is to reduce their interest burden, allowing them to reinvest those savings into operations or improving production efficiency.

Who is eligible for tax incentives for exporters in India

Whether you’re eligible to claim tax incentives depends on what you export. Here’s what you must know:

Eligibility for service exporters and freelancers

How to claim export incentives: A step by step guide

Note: This is the generalised workflow. Specific steps and application requirements vary by scheme, see our dedicated guides on Duty Drawback, <a href="https://www.skydo.com/blog/rodtep-scheme-guide">RoDTEP</a>, and EPCG for more details.

Start by obtaining a ten-digit Import Export Code (IEC) from the DGFT portal. It is your unique business identifier for all international trade transactions. Link IEC to your GST registration on the portal to synchronize your trade data with tax records.

Step 2. File shipping bills with incentive declaration

A shipping bill is a mandatory customs document. File it electronically when your goods physically leave India. You must also declare your intent to claim benefits on the shipping bill, at the time of filing it.

File GSTR-1 and GSTR-3B returns regularly to be eligible for a refund claim. The government systems match the GST portal and ICEGATE data to reconcile your<a href="https://www.skydo.com/blog/what-is-export-invoice"> export invoices</a> with shipping bill data.

Post-shipment, log into the DGFT or ICEGATE portal to submit your application online. Provide digital copies of the shipping bill, commercial invoice, and packing list.

Step 5. Track claim status and receive credit

You can track your application’s real-time status online. Once your application is approved, you get benefits as electronic credits to your duty credit ledger.

What documents are required to claim export benefits

Most exporters have digital and physical records of essential export documents. They are required for claiming refunds and present as proof during audits.

How long does it take to receive export incentive payments

Having realistic expectations for your payout is crucial because timelines vary based on the scheme and the verification process.

Delays are most commonly caused by data mismatches between your shipping bills and GST returns. A single character difference can stop the automated system from releasing your funds.

What are common mistakes that delay export incentive claims

A minor error can cause weeks of delay, which will impact liquidity. You don’t want that and the best way to avoid it, is by preventing from making these common errors:

How can service exporters and freelancers claim export benefits

The claim process for service exporters and freelancers differs from that for goods exporters. Here’s how:

Simplify your export payment documentation with Skydo

If you have read till here, you must have realized the importance of documentation in claiming export benefits. And it doesn’t just end there. There’s also post-payment documentation, which involves getting FIRC from the bank.&nbsp;

There are two challenges with banks: the process is slow, requiring multiple follow-ups, and they don’t provide an FIRC ‌for free. Plus, banks charge costly SWIFT fees and apply forex markups on the conversion rate, which takes a deep cut in your earning.

<a href="https://www.skydo.com">Skydo</a> is a modern payment platform that serves as a potent alternative to these challenges.&nbsp;

FIRC and eBRC comes in handy while claiming export benefits under various government schemes. Try Skydo.

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What is transfer pricing and how does it work for MNCs?

Transfer pricing is a method Multinational Corporations (MNCs) use to set prices for goods, services, or intellectual property traded between their own subsidiaries in different countries. For example, an Indian IT company uses transfer pricing to decide software service charges provided to its US-based parent company.

To decide ‌fair pricing, MNCs follow the arm’s length principle. It requires ‌companies to price such transactions as if they were dealing with independent parties in a competitive market.

This principle gives MNCs two broad benefits: to allocate profits fairly across various jurisdictions and ensure taxes are paid where the actual economic activity and value creation occur.

Why do transfer pricing rules matter for MNCs?

The transfer pricing rules avoid double taxation and save companies from costly audit penalties. Here’s more information about them:

Tax compliance across multiple jurisdictions: Transfer pricing ensures that companies report profit where economic value is created. To decide each entity’s contribution to the profit, companies use functional analysis. It breaks down which specific entity performs key tasks, employs assets, and assumes the most risk.

Avoiding double taxation on intercompany transactions: Without a transfer pricing policy, income can get taxed in two different countries. Proper documentation resolves these cross-border disputes.

Managing audit risk and penalties: Tax authorities, such as India’s Transfer Pricing Officer (TPO) examine financial records rigorously to verify compliance with the arm’s length principle. If MNCs do not provide the required documentation within a 30-day window of a request, it can lead to penalties ranging from 20% to 40% in some jurisdictions.

What are different transfer pricing methodologies?

To establish an arm’s length price, MNCs select one of the five methods recognized by the OECD and global tax authorities. Here are the common methods and examples:&nbsp;

The following table summarizes the five OECD-accepted transfer pricing methods and the specific business scenarios where they are typically applied:

What transfer pricing documentation do MNCs need

Multinational corporations must maintain a three-tier documentation structure to comply with the BEPS Action 13 global standards. It is an OECD/G20 initiative that requires multinational companies to provide detailed data on income, tax payments, and business activities in different jurisdictions.

The master file summarizes the global business group. It covers the organization’s structure, financial activities, supply chain, and financial or intangible assets between subsidiaries. In India, every constituent entity of an international group must maintain a master file to help tax authorities understand the group’s global tax position.

This file focuses only on ‌transactions happening within a specific country. It contains a Functional Analysis (FAR) describing the functions performed, assets used, and risks assumed by each party. It also includes the transfer pricing method used to prove that local transactions meet the arm’s length standard.

Country-by-Country Reporting (CbCR) obligations

CbCR is a specialized annual prepared by MNCs with annual consolidated revenue exceeding €750 million (or ₹6,400 crore in India). The report contains a simple table that describes how much profit was made, how many people were employed, and how much tax was paid in every single country where the company operates.&nbsp;

This report makes it easy for the tax authorities to understand if the company is earning most profits in one country but shifting them to another low-tax country to reduce its liability.

How to build a transfer pricing strategy for your business

To build a transfer strategy for your business, you must follow these five important steps:

Step 1: Map all related party transactions

Identify every global intercompany transaction, including the transfer of goods, services, and intellectual property. Also check for complex arrangements such as intercompany loans, IP licenses, and cost-sharing agreements

Step 2: Select the appropriate pricing method for each transaction

Match each transaction type to the most suitable of the above five OECD-recognized pricing methods. Choose the one that aligns with the nature of the transaction and provides the most reliable arm’s length result.

Step 3: Conduct benchmarking analysis using transfer pricing data

Check professional databases like ProwessIQ or CapitalineTP in India, or Orbis for global transfer pricing data. Use the data as a benchmark to establish an arm’s length range.

Step 4: Document your transfer pricing policy

Prepare a document that includes a thorough functional analysis (FAR) and an economic analysis of your transactions. Include roles, risks assumed, and assets employed by each entity involved. Be proactive in preparing the documentation; don’t wait until the audit.

Review your transfer pricing policy annually to ensure it remains relevant to changing business conditions. Your pricing also remains defensive against changing regulatory environments and adapt to internal organizational changes.

What are global transfer pricing rules across major jurisdictions

These are the three most important jurisdiction transfer pricing rules you must know:

The OECD Guidelines are the global standard for transfer pricing, followed by most countries. When a business aligns with these standards, it can avoid double taxation and ensure that two different governments do not tax its profits twice.

The OECD transfer pricing guidelines are updated regularly, the most recent being in January 2022, which provided improved guidance on financial transactions and hard-to-value intangibles.

In India, Sections 92 to 92F of the Income Tax Act, 1961, and Rules 10A to 10E govern transfer pricing. Companies must justify their pricing to a dedicated Transfer Pricing Officer (TPO) who conducts rigorous audits of intercompany transactions to verify they are aligned with the arm’s length principle. This means they must have a solid audit trail of every transaction in India.

India also offers Safe Harbour rules for specific sectors, which allows companies to use pre-defined margins acceptable ‌without a detailed audit.

Transfer pricing rules in the United States

The IRS Section 482 governs transfer pricing in the United States. It allows the Internal Revenue Service (IRS) to reallocate income or deductions to verify the true taxable income of related parties.

The IRS penalizes companies for substantial or gross valuation misstatements, which can reach 20% to 40% of the additional tax owed. To reduce these risks, many MNCs pursue Advance Pricing Agreements (APAs), which provide prospective tax certainty for five years.

How does transfer pricing affect cross-border payments

While managing transfer pricing, stay mindful of these cross-border payment compliance requirements:

Managing cross-border payments between related entities? Skydo provides transparent fee structures and automatic FIRC generation to support your compliance documentation.

How Skydo helps MNCs manage international payments

One part of a transfer pricing policy is international payments, which requires significant compliance efforts. <a href="https://www.skydo.com">Skydo</a> is a specialized payment infrastructure that takes end-to-end care of this part.

It is not a transfer pricing advisor, but it provides you the tools to view the actual financial flows, document them, and keep them audit-ready.

Integrating Skydo also streamlines the local file requirements through the following features:

Ready to simplify your international payment documentation? Open a Skydo account in minutes and get compliant FIRCs for every transaction.

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What Is an Authorised Dealer (AD) Bank in India?

An Authorised Dealer (AD) bank in India is a bank licensed by the Reserve Bank of India (RBI) to deal in foreign exchange transactions, including receiving inward remittances on behalf of Indian businesses and individuals.

AD banks are the primary channel through which foreign currency enters India legally. They convert incoming foreign currency into INR and credit the recipient's account. For Indian exporters and freelancers, the AD bank is typically their existing savings or current account bank, such as HDFC, ICICI, or SBI, and they receive international wire transfers directly into that account via SWIFT.

For example, a Pune-based software consultant invoices a UK client £2,000 and receives the payment into their HDFC current account. HDFC acts as the AD bank, converting and crediting the INR equivalent.

What Is a Payment Platform for International Payments?

A payment platform for international payments is a digital intermediary, authorized by the RBI, that gives Indian freelancers and businesses foreign currency virtual accounts, collects payments from overseas clients, and settles the equivalent INR into the user's Indian bank account.

Unlike AD banks, payment platforms are purpose-built for <a href="https://www.skydo.com/blog/cross-border-payments">cross-border collections</a>. They handle the routing, currency conversion, and compliance layer digitally, so you don't need to walk into a branch or speak to a relationship manager (RM).

Payment platforms typically offer virtual account numbers in currencies like USD, EUR, and GBP. You share the number with your foreign client, the client pays into that virtual account as a local transfer, and the platform settles INR to your Indian bank account.

For example, a Chennai-based content writer signs up for Skydo, gets a US virtual account number, and shares it with an American client. The writer receives $2,500, and the platform handles the conversion and credits INR within one working day.

How Do AD Banks and Payment Platforms Actually Work for Inward Remittances?

For inward remittances, AD banks rely on the SWIFT network for wire transfers, while payment platforms use virtual accounts and local payment rails to collect funds from foreign clients and settle INR domestically.

How Payment Platforms Process Inward Remittances

AD Bank vs Payment Platform: How Do They Compare on Cost, Speed, and Compliance?

Compared head-to-head, AD banks tend to cost more and take longer to settle, with a forex markup of up to 8% plus SWIFT and intermediary fees and settlement in 2 to 5 business days. RBI-authorized payment platforms offer predictable fees and faster INR credit, within 1 working day on Skydo. Both can satisfy compliance requirements for Indian exporters and freelancers.

On a bank wire, the <a href="https://www.skydo.com/blog/international-bank-transfer-fees-freelancers-india">international bank transfer fees</a> are a forex markup plus SWIFT and intermediary fees. Skydo charges $19 under $2,000, $29 from $2,000 to $10,000, and 0.3% above $10,000. The table lays out the two options side by side.

Worked Example: Bangalore-Based UX Designer Receiving $3,000 From a US Client

Can a Payment Platform Issue a FIRC Certificate for Foreign Payments?

Yes. RBI-authorized payment platforms can issue FIRC-equivalent certificates, such as a FIRA (Foreign Inward Remittance Advice), that are equally valid for GST filing, income tax assessments, and export-related compliance in India.

When Should You Use an AD Bank vs a Payment Platform?

Use an AD bank when the transaction type or amount requires direct bank involvement. Use a payment platform when you are a freelancer, agency, or service exporter receiving regular foreign payments and want lower costs, faster settlement, and automated documentation.

The practical answer for most Indian freelancers and agencies is to use a <a href="https://www.skydo.com/blog/payment-gateway-for-international-payments-india">payment platform</a> as the collection layer and your existing AD bank account as the landing account for INR. They work together. You still need an AD bank account to receive the INR that Skydo settles.

If you receive under $10,000 per transaction as a freelancer or agency, compare what your current bank charges you against <a href="https://www.skydo.com/">Skydo's flat fee</a>.

How Does Skydo Help Indian Freelancers and Agencies Receive Foreign Payments?

A bank wire can cost you in several places. Intermediary banks may deduct fees along the SWIFT chain, the bank's exchange rate includes a forex markup, and settlement can take 2 to 5 business days. <a href="https://www.skydo.com/">Skydo</a> is built to remove those friction points for Indian freelancers, agencies, and service exporters. You get free virtual accounts in six currencies, flat fees of $19 or $29 up to $10,000 and 0.3% above that, INR credit within one working day, and automatic compliance documentation.