Tariff-rate quota

In economics, a tariff-rate quota (TRQ) (also called a tariff quota) is a two-tiered tariff system that combines import quotas and tariffs to regulate import products.

A TRQ allows a lower tariff rate on imports of a given product within a specified quantity and requires a higher tariff rate on imports exceeding that quantity.[1] For example, a country might allow the importation of 5,000 tractors at a tariff rate of 10%. However, any tractor imported above this quantity would be subject to a tariff rate of 30%.

Unlike a simple quota system, a TRQ regime does not restrict the quantity of imported products.[2] The “in-quota commitment” is complemented by an “out-of-quota commitment”. The out of quota commitment does not set any limit on the quantity or value of a imported product, but instead applies a different, normally higher, tariff rate to that product. Imports face this higher duty rate once the in-quota quantity or value has been reached, or if any requirement associated with the “in-quota commitment” is not fulfilled.[3]

A TRQ is generally used to protect domestic production by restricting imports. Under that regime, the quota component combines with a specified tariff level to provide the desired level of protection. In many cases, imports above the threshold may face a prohibitive “out-of-quota” tariff rate.[4]

  1. ^ "Market Access Map - Glossary". ITC.
  2. ^ "Quota". Encyclopedia Britannica.
  3. ^ "Tariff rate quotas explained: A guide to answering consultation questions". Government of Canada.
  4. ^ Harry de Gorter and Erika Kliauga. "Reducing Tariffs versus Expanding Tariff Rate Quotas" (PDF). World Bank. S2CID 174780110. Archived from the original (PDF) on 2019-06-23.

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