Janie took a vacation to Italy and bought $1,000 worth of jewelry in Florence. The United States will allow Janie to bring $800 back into the country duty free. What happens to the
other $200 that is part of her total expenditure?

Janie must pay an ad valorem tariff on the extra $200

Explanation:

Coming in from Italy, the US Government will allow Janie to bring in $800 worth of Jewelry into the country. The rest will be charged a Customs Duty or Tariff.

Customs duties are charged by the Government on imported goods as a way to reduce trade on imports which would in theory stimulate purchasing from domestic companies. It also brings in revenue for Government.

Customs duties are usually ad valorem in nature which means that they are charged as a percentage of the good's value. In this case that percentage will probably be 3% as the value is less than $1,000.

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