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]