Tariff Quotas

Tariff Quotas: The Ultimate FAQ Guide

Tariff quota allows a certain quantity of imported goods with duty-free or lower tariffs rate. However, claiming a quota can be very hard if you don’t have any knowledge regarding the process.

This guide provides you with the best option when you’re trying to make a claim for Tariff Quotas.

Keep reading:

What Are Tariff Quotas?

Tariff quotas can be defined as a total or limited waiver of the normal tariffs that have been granted temporarily by the government to some extent of imported goods.

Quotas can be claimed to reduce the import tariffs. Once the period of a quota is finished, then the goods will be imported with usual tariffs.

Fig 1 - What Are Tariff Quotas

What Are Tariff Quotas

 Many association treaties and free trade arrangements like WTO agreements, the EU GSP can affect tariff quotas.

WTO tariff quotas can be used to import goods from all countries.

Tariff quotas also cover those countries that are in the list of agreements.

Tariff quotas cannot be applied in those countries where there is no agreement.

Many companies apply for tariff quotas the same way they apply for tariff suspensions for their goods.

How Does Tariff Quotas Work?

Tariff quota allows a certain quantity of imported goods with a duty-free or lower tariffs rate.

If the quantity reaches its limit, then quotas will not work and you have to pay a higher duty rate.

However, if you claim a tariff quota, then the duty rate of imported goods can be less.

Fig 2 - How Does Tariff Quotas Work

How Does Tariff Quotas Work

 The government maintains and overlooks the system of licensing tariff quotas and importers. This is to maintain the difference between the higher domestic price and the foreign price.

Tariff quotas can also vary from one country to another.

The tariff laws are different in every country.

Who Benefits From Tariff Quotas?

Fig 3 - Who Benefits From Tariff Quotas

Who Benefits From Tariff Quotas

 Everyone with a proper authorized license can claim Tariff Quotas.

Tariff quotas can be very beneficial for manufacturers and exporters, merchant exporters who are trying to support manufacturers and service providers.

What Is The Difference Between Tariff And Quotas?

Tariffs and Quotas are different factors in the trading world. There are key differences between these two factors.

  • Tariffs refer to the tax rates of imported goods. And a Quota refers to the limited quantity of imported goods defined by the government.
  • Tariffs generate revenue for the country and also increase the GDP. On the other hand, Quotas are imposed on the quality of goods, so it does not have any effect on the country’s GDP.

Fig 4 - What Is The Difference Between Tariff And Quotas

What Is The Difference Between Tariff And Quotas

  •  Tariffs affect the supply chain by increasing consumer demand. However, quotas reduce the consumer surplus.
  • Tariff is a source of collecting revenue for the government. It increases the income of the traders, though. But quotas help to increase the income of traders.

What Is The Impact Of Tariff Quotas On The World Supply Chain?

Tariff Quotas have many impacts. Once the tariffs are higher, it can affect the business in one of these three ways:

  • Absorbing the higher cost
  • Increasing prices for the customers
  • Trying to rework the supply chain in order to avoid the higher tariffs

This can have both positive and negative impacts on the global supply chain.

Many businesses try to rework their supply chain to reduce import tariffs.

They may relocate their production to another country where import tariffs are less or can switch their suppliers.

Fig 5 - What Is The Impact Of Tariff Quotas On The World Supply Chain

What Is The Impact Of Tariff Quotas On The World Supply Chain

 A Positive impact of this is that it can widen a company’s global reach and can provide a solid and reliable supply chain to avoid any future challenges.

It can also reduce the cost of importing goods.

However, there is also a downside.

Moving the supply chain from one country to another country can be very expensive. It can also delay shipments that can affect the business itself.

While switching to new suppliers can take so long and sometimes it can reduce the quality of your products.

What Is An Example Of Tariff Quotas?

It is a two-tiered tariff system consisting of import quotas and tariffs. Tariff quotas can be different based on their agreements.

For instance, as of 2021 UK allows companies to apply for 2,195,000kgs of poultry goods to import and the tariff rate is 25%. More good than this above amount will include extra tariff rate.

What Goods Are Covered In Tariff Quotas?

Fig 6 - What Goods Are Covered In Tariff Quotas

What Goods Are Covered In Tariff Quotas

Tariff quotas can cover many products, but it all depends on different countries.

For instance, the US allows tariff quotas on poultry goods such as milk and cream, Canadian cheese, peanuts, sugar, cotton fabric, infant formula, blended syrups, and also on tobacco.

When Can You Claim Tariff Quotas?

Tariff Quotas can be claimed when you’re importing goods that are entering free circulation. The maximum time limit of making a claim is up to 3 years for your goods to import.

You can check the status and balances of the quota. You can also claim Quotas after they are exhausted or

How Can You Claim Tariff Quotas?

Claiming different Tariff Quotas varies from country to country. Different governments have different laws regarding how one can apply for tariff quotas.

You need to enter the tariff quota order number on the following import declaration:

  • If you want Customs Handling of Import and Export Freight (CHIEF), then in box 39
  • If you have the Customs Declaration Service in Data Element 8/1

Fig 7 - How Can You Claim Tariff Quotas

How Can You Claim Tariff Quotas

You will need to attach documents of your imported goods that can support the available claim on your declaration.

If your claim is critical, then you have to pay the full rate of security duty fees.

Once your quota limit is over, then your claim will no longer be valid and you have to pay full tariffs.

Even if you have a license quota, you need to provide the tariff quota order number on your declaration.

How Can You Claim A Quota using Simplified Declarations For Imports?

You can make a claim for tariff quota while submitting your supplementary import declaration only if you have permission to use simplified declarations.

When you’re claiming quota using simplified declarations for imports, there are two different methods.

The Declarant’s Records Entry:

Here you need to enter the goods in your records, and then you need to give detailed information regarding your goods on a supplementary declaration.

Simplified Declaration Procedure:

You can give a simplified frontier declaration online where you don’t have to provide much info on your goods.

You only need to give full information on a supplementary declaration.

In case you have any questions of inquiry about tariff quotas, contact BanSar now.

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