Tariff-rate quota

A tariff-rate quota (TRQ) is a two-tiered tariff regime which combines two conventional policy instruments (import quota and tariff) in order to regulate imports. In its essence, a TRQ regime allows a lower tariff rate to be imposed on imports of a given product within a specified quantity, and requires a higher tariff rate to be imposed on imports exceeding that quantity. For example, a country may allow the importation of 5000 tractors at a tariff rate of 10%, and any tractor imported above this quantity will be subject to a tariff rate of 30%. A tariff-rate quota (TRQ) is a two-tiered tariff regime which combines two conventional policy instruments (import quota and tariff) in order to regulate imports. In its essence, a TRQ regime allows a lower tariff rate to be imposed on imports of a given product within a specified quantity, and requires a higher tariff rate to be imposed on imports exceeding that quantity. For example, a country may allow the importation of 5000 tractors at a tariff rate of 10%, and any tractor imported above this quantity will be subject to a tariff rate of 30%. Unlike quota, a TRQ regime does not function as a quantity restriction on imported products. The “in-quota commitment” is complemented by an “out-of-quota commitment”, and the latter does not set any limit on the quantity or value of a product that may be imported, but instead applies a different - normally higher - tariff rate to that specific 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. TRQ is generally considered as a measure to protect domestic production through restricting imports. Under this 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. The terms tariff quota and tariff-rate quota are used interchangeably in existing literature although tariff quota is more legally accurate because it may include specific tariffs, while the other term excludes them. Tariff quota is also the term officially used in Article XIII of the General Agreement on Tariffs and Trade (GATT). Customs duties and other charges are explicitly excluded from the scope of quantitative restrictions within the meaning of Article XI of the GATT. Therefore, TRQ is not a quantitative restriction given the fact that the regime subjects imports to varying duties rather than prohibits or restricts the quantity of imports. There are several dispute settlement rulings regarding the legitimacy of TRQ under WTO law. For instance, the Panel in US - Pipeline stated that a tariff quota involves the “application of a higher tariff rate to imported goods after a specific quantity of the item has entered the country at a lower prevailing rate,” while any quantity above the quota is subject to a higher duty. Particularly, in EC- Bananas III, the Appellate Body asserted that: In contrast to quantitative restrictions, tariff quotas do not fall under the prohibition in Article XI:1 and are in principle lawful under the GATT 1994, provided that quota tariffs are applied consistently with Article I. Although TRQ is also used within the WTO for non-agricultural products, the regime is particularly important in the agriculture sector considering the attempts to eliminate non-tariff measures in this sector. As a result of the Uruguay Round, all non-tariff barriers to agricultural products had to be removed or converted to tariffs (tariffication) to ensure that the sector is protected only by tariffs. In some cases, the calculated equivalent tariffs would be too high to allow for any real opportunity for imports to enter the market. Therefore, a system of TRQ was introduced to maintain existing access levels, and make way for minimum access opportunities.