DETAILED OVERVIEW OF TARIFF RATE QUOTAS IN VIETNAM

Tariff rate quotas are a procedure of great interest to many organizations and businesses, especially those operating in the import-export sector. This is a regulatory measure applied by competent state authorities to control the volume, quantity, and value of goods in import and export activities.

1. What is a Tariff Rate Quota?

1.1. The Concept of Tariffs and Quotas

A tariff is a tax imposed by the customs authority of a country on goods as they are exported or imported across the country’s borders or through its seaports. In English, tariffs are commonly referred to as “Tariffs.”

A quota is a regulation set by the government to limit the amount of goods or services that can be imported or exported between countries over a specific period. This is a measure used to control international trade flow.

Legally, import and export tariff quotas are defined under the Law on Foreign Trade Management. Tariff quotas are a tool to determine the volume, quantity, or value of goods for which specific tax rates are applied.

1.2. What is the English Term for Tariff Rate Quota?

In English, tariff rate quotas are called Tariff Rate Quotas (TRQ), which is a tariff system that distinguishes between different quantities of imported and exported goods.

1.3. Example of Tariff Rate Quotas

For example, if a country produces 40,000 tons of commodity X but the demand is 70,000 tons, the first 30,000 tons imported will be subject to lower import tariffs, while any amount beyond 30,001 tons will face higher tariffs. This is how tariff rate quotas are used to regulate imports in many countries.

1.4. The Purpose of Tariff Rate Quotas

Tariff rate quotas help determine the volume, quantity, and value of goods imported and exported, applying the corresponding tax rates for each specific case.

2. Objectives of Tariffs and Import Quotas

The application of these measures aims to achieve the following objectives:

Protect the domestic market from the adverse impact of imported goods of the same type (which are often cheaper, or have a stronger brand or higher quality).
Regulate and reduce trade balance deficits, protecting national foreign exchange reserves.
Manage the market, reducing the consumption of luxury goods or non-promoted items.

3. Advantages and Disadvantages of Tariff Rate Quotas

Advantages:

Import quotas motivate domestic producers to grow, while keeping imports from spiking even when demand increases.
Helps reduce trade balance deficits and maintain foreign exchange reserves when necessary.

Disadvantages:

If not tightly managed, quotas could lead to risks of corruption and bribery during the licensing process.
Entities with import licenses can generate monopolistic profits, harming consumers.
Exporting countries may face disadvantages, affecting bilateral trade relations.

The above are essential details about tariff rate quotas that you should know. We hope this information proves valuable to you. With over 13 years of experience in the logistics field, we are proud to be your trusted partner throughout your journey.

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