Reed Smith Client Alerts

The new European Commission management framework and Brexit heavily affect the use of tariff rate quotas, especially for food and agricultural products, as well as steel. 

Companies benefiting from tariff rate quotas should watch developments closely and assess the impact of upcoming changes on their operations. Forewarned is forearmed: companies may need to apply immediate changes to secure quota eligibility in the future.

Authors: Yves Melin Philippe Heeren Bérengère Vigneron

Background to tariff rate quotas

Tariff rate quotas (TRQs) allow for the importation of products at a lower than normal duty rate. These concessions exist by virtue of the EU’s WTO schedule of concessions or bilateral trade agreements concluded by the EU, or, exceptionally, they could take the form of autonomous concessions to make up for insufficient production in the Union. 

The European Commission manages TRQs through two methods: one based on the chronological order of dates of acceptance of customs declarations (‘first-come, first-served’) and the other based on the volumes requested when the applications were submitted (‘simultaneous examination’). The Directorate-General for Taxation and Customs Union (DG TAXUD) manages the majority of tariff quotas on a first-come, first-served basis.1  A notable exception is agricultural tariff quotas, which are managed by the Directorate-General for Agriculture and Rural Development (DG AGRI) through the simultaneous examination method and the granting of import licences.

Quota management reform

Since 2014, the European Commission has been working on a reform of the legal framework for quota management. The existing rules were covered in a multitude of legal acts, adding to the general complexity. The new, harmonised management frameworks – one for first-come, first-served TRQs, one for simultaneous examination TRQs – apply to tariff quota periods starting from 1 January 2021 onwards.

For first-come, first-served TRQs managed by DG TAXUD, the new framework establishes common rules for the lodging, release and forfeiture of securities.2  For agricultural TRQs managed by DG AGRI, the new framework is more far-reaching, including new rules on quota eligibility, application, allocation, and utilisation.3 For tariff quotas for poultry meat and fruits and vegetables, prior electronic registration may be required. Quota applicants must demonstrate volumes traded in the past in a particular manner, and supportive evidence must meet new invoicing requirements. The European Commission has transferred the management of some tariff quotas from DG AGRI to DG TAXUD.

For simultaneous examination TRQs, rights deriving from quota licences become generally transferable to other economic operators. Transferring companies must carefully consider the contractual provisions governing the transfer, in order to be able to draw on quotas in future years.