What is Tariff-rate Quota?

Legal Definition
A tariff-rate quota (TRQ) is a trade policy tool used to protect a domestically-produced commodity or product from competitive imports.

A 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. Essentially, a TRQ is a two-tiered tariff. The first Q imports entering within the quota portion of a TRQ are usually subject to a lower, tariff rate called the Inside tariff quota rate or ITQR. Imports above the quota’s quantitative threshold (Q) face a much higher (usually prohibitive) Outside tariff quota rate or OTQR. The Q units are called the quota volume, and this volume serves as the cut off between the ITQR and the OTQR.

For example, in 2013, South Africa applied the following TRQ on imports of “Frozen cuts and edible offal of fowls of the species Gallus domesticus”, a type of chicken (HS code 02071420) originating from the United States of America:

  • Inside tariff quota rate (ITQR): 16.4%
  • Outside tariff quota rate (OTQR): 27.0%

In 2013, the cut-off for this quota rate was 29,033 tonnes of imported offal / year.

There are several different ways in which quotas can be administered by governments:
-- Wikipedia
Legal Definition
The import quota allowing a limited quantity of merchandise to enter a country that is to be consumed at a tariff at a reduced rate. Tariff quota.