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ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws

Veldia, Marnova and Torvan form a customs union. Which of the following is a feature that distinguishes a customs union from a free trade area?

A customs union removes tariffs between its members and also applies a common external tariff to goods from non-members. In a mere free trade area, each member keeps its own external tariffs. A single currency is a further step, not part of a customs union.

  1. AMembers remove tariffs on trade between themselves but each keeps its own external tariffs on non-members
  2. BMembers share a single currency and a common central bank
  3. CMembers remove internal tariffs and apply a common external tariff on imports from non-membersCorrect

Explanation

A customs union removes tariffs between members and adopts a common external tariff against non-members. In a free trade area, members remove internal tariffs but each sets its own external tariffs, which is the first option. A single currency is a feature of monetary union, not a customs union.

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