Tariff Rate Quota:

Tariff rate quota refers to a trade policy tool used to protect a domestically-produced commodity or product from competitive imports. A tariff rate quota (TRQ) combines two policy instruments that nations historically have used to restrict such imports: quotas and tariffs. In a TRQ, the quota component works together with a specified tariff level to provide the desired degree of import protection. Imports entering during a specific time period under the quota portion of a TRQ are usually subject to a lower, or sometimes a zero, tariff rate. Imports above the quota's quantitative threshold face a much higher (usually prohibitive) tariff. Currently, TRQs apply to U.S. imports of certain dairy products, beef, cotton, peanuts, sugar, certain sugar containing products, and tobacco. The tariff-rate quota resulted from the Uruguay Round Agreement on Agriculture. Certain countries agreed to provide minimum import opportunities for products previously protected by non-tariff barriers. This import system established a quota and a two-tier tariff regime for affected commodities. Imports within the quota enter at a lower (in-quota) tariff rate while a higher (out- of-quota) tariff rate is used for imports above the concessionary access level. An effective TRQ system should only restrict trade to the extent it limits the quantity of goods allowed access to a market at the low in-quota duty rate. However, poor administrations of TRQs and high in quota duties have prevented exporters from filling TRQs. In other instances, exporters have not been able to meet fully market demands because members have administered their TRQs in a manner that has restricted products or suppliers, or both, or has raised the price of imports. During the Uruguay Round, members agreed to a tariff rate quota (TRQ) system as the most appropriate method to ensure market access during the transition from an agricultural trading system of complex tariffs and non tariff barriers to a tariff only regime.