Customs territory in the context of Trade bloc

An economic and monetary union (EMU) is a type of trade bloc that features a combination of a common market, customs union, and monetary union. Established via a trade pact, an EMU constitutes the sixth of seven stages in the process of economic integration. An EMU agreement usually combines a customs union with a common market. A typical EMU establishes free trade and a common external tariff throughout its jurisdiction. It is also designed to protect freedom in the movement of goods, services, and people. This arrangement is distinct from a monetary union (e.g., the Latin Monetary Union), which does not usually involve a common market. As with the economic and monetary union established among the 27 member states of the European Union (EU), an EMU may affect different parts of its jurisdiction in different ways. Some areas are subject to separate customs regulations from other areas subject to the EMU. These various arrangements may be established in a formal agreement, or they may exist on a de facto basis. For example, not all EU member states use the Euro established by its currency union, and not all EU member states are part of the Schengen Area. Some EU members participate in both unions, and some in neither.

Territories of the United States, Australian External Territories and New Zealand territories each share a currency and, for the most part, the market of their respective mainland states. However, they are generally not part of the same customs territories.

A tariff or import tax is a duty imposed by a national government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods or raw materials and is paid by the exporter. Besides being a source of revenue, import duties can also be a form of regulation of foreign trade and policy that burden foreign products to encourage or safeguard domestic industry. Protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas and other non-tariff barriers to trade.

Tariffs can be fixed (a constant sum per unit of imported goods or a percentage of the price) or variable (the amount varies according to the price). Tariffs on imports are designed to raise the price of imported goods to discourage consumption. The intention is for citizens to buy local products instead, which, according to supporters, would stimulate their country's economy. Tariffs therefore provide an incentive to develop production and replace imports with domestic products. Tariffs are meant to reduce pressure from foreign competition and, according to supporters, would help reduce the trade deficit. They have historically been justified as a means to protect infant industries and to allow import substitution industrialisation (industrializing a nation by replacing imported goods with domestic production). Tariffs may also be used to rectify artificially low prices for certain imported goods, due to dumping, export subsidies or currency manipulation. The effect is to raise the price of the goods in the destination country.