Background: Public consultation on Canada’s administration of import quotas for beef and veal products under the World Trade Organization (WTO) tariff rate quota (TRQ)

Global Affairs Canada will be reviewing its administration of the current World Trade Organization (WTO) tariff rate quota (TRQ) for beef and veal.

Tariff rate quota 

A TRQ is a trade policy tool that allows a specified quantity of a product to enter a country at a reduced tariff rate, while quantities above this threshold are subject to higher tariffs.

This mechanism is used as part of Canada’s commitments under various international trade agreements. To qualify for preferential tariff treatment under a TRQ, the product must meet specific criteria, such as a detailed product description or adherence to product-specific rules of origin. TRQ-specific requirements will be laid out in the WTO TRQ allocation policy.

Options available for allocation methodologies under a TRQ

Generally, distribution will vary from quota to quota. The following are some examples of allocation methodologies:

1. First-come-first-served: No allocation process is involved. Eligible applicants may import products and receive the preferential duty rate until the quota is fully utilized. Import permits are issued on a shipment-by-shipment basis until the quota is filled. After the quota is filled, in the absence of other trade commitments, imports are subject to the over access commitment rate of duty;
2. Previous year’s utilization: Eligible applicants receive an allocation equal to their total utilization during the previous year. Further quantities are available on a first-come-first-served basis as long as quota remains available. New entrants normally obtain quota on a first-come-first-served basis for their first year;
3. Equal share: All eligible applicants receive an equal allocation;
4. Market share: All eligible applicants receive an allocation proportional to their respective market shares; or,
5. Hybrid: The allocation method combines two or more of the above approaches.

Eligibility criteria

Eligibility criteria for each quota are used to determine who can obtain an allocation or a permit to import controlled products under the Export and Import Permits Act. Sometimes, the only criterion is that the applicant must be a “resident of Canada.” For a person, this means ordinarily residing in Canada. For a corporation, it means having a head office in Canada or operating a branch office in Canada.

Additional eligibility criteria may apply, depending on the product type, the amount of production in Canada, whether the product is for retail sale or manufacturing, or the number of interested applicants. Eligible applicants can include importers, processors, or distributors.

Return policy

Quotas are administered annually, and allocations are valid only for the year they are granted. In addition, applicants who seek to obtain an allocation in the following year may be assessed on the basis of their performance in the current year.

A return policy is a provision that allows allocation holders that are unable to substantially utilize their allocations to return all, or part, of that allocation by a specific date, with or without a penalty.

The amount that is returned can then be made available to other eligible applicants that are able to utilize the allocation, which contributes to maximum utilization of the quota. It also allows an allocation holder that is unable to substantially utilize the allocation in any one year to avoid facing an under-utilization penalty the following year.

Return penalty

Allocation holders that return a significant portion of their allocation may face a return penalty if they apply for an allocation in subsequent years. The details of the return policy, including what is meant by a “significant portion”, vary by quota.

Generally, the applicant’s allocation will be reduced in proportion to the amounts returned in the previous year.

The purpose of the return penalty is:

• to direct allocations to applicants that can fully utilize them
• to encourage maximum utilization of the quota by industry

Under-utilization penalty

The purpose of the under-utilization policy is to encourage maximum utilization of the quota by directing allocations to applicants that will utilize them. Applicants who are unable to utilize their full allocations, and who also do not make use of the return policy, will have their allocations in the following year reduced in proportion to the amount they did not utilize.

The threshold below which an allocation is considered under-utilized varies by quota. In some quotas, allocation holders that have used 85% or more of their respective allocations are considered to have fully utilized their allocations and will not be subject to an under-utilization penalty in the following year. In other quotas, the threshold may be as high as 95%.

Canada’s current administration of the TRQ for beef and veal under the WTO

Under Canada’s commitments at the World Trade Organization (WTO), there is a Canadian TRQ for beef and veal imports that applies to all WTO members, with the explicit exception of the US, Mexico and Chile.

Additionally, many of Canada’s Free Trade Agreement (FTA) partners, as outlined in Chapter 2 of Canada’s Custom Tariff, benefit from preferential market access under the terms of these FTAs, and do not need an allocation under the WTO beef and veal TRQ to benefit from these preferential rates.

The administration of the TRQ for beef and veal is published on the Global Affairs Canada website in the Notice to Importers - Beef and Veal Imports (Items 114 to 116 on the Import Control List), Serial No: 883

Import permits

In order to access the preferential tariff for beef and veal eligible for imports from Most-Favoured-Nation (MFN) countries, Australia or New Zealand, a valid Canadian-government issued shipment-specific permit is required as listed under section 10 of the Notice to Importers - Beef and Veal Imports (Items 114 to 116 on the Import Control List)

Current allocation methodology under the TRQ for beef and veal under the WTO

As outlined in the Notice to importers, the Department established three pools, one for New Zealand of 29,600,000 kg, one for Australia of 35,000,000 kg and one for eligible non-FTA countries of 11,809,000 kg, with the total amount available under the TRQ being 76,409,000 kg.

Eligible applicants are given an allocation that reflects their equivalent market share within their respective group, either as a processor/retail processor (57,307,000 kg) or a distributor (19,102,000 kg). Market shares are calculated in accordance with the amount of non-FTA beef and veal processed in their own facilities or the amount of non-FTA beef and veal imported during the relevant base period. Allocations are not tied to a specific portion or reserve of the TRQ.

Allocation holders may utilize their allocation to import beef from any eligible non-FTA country within the limits of the access quantities set out in the Notice. Once the TRQ access quantity is reached, any imports will be subject to the higher “over access commitment” rate of duty of 26.5% regardless of whether the importer has an unused quota allocation. All import allocations expire at the end of each allocation year, and all applicants interested in receiving an import allocation must reapply each year.

Allocation period

Under the WTO, the TRQ for beef and veal is administered on a calendar-year basis (i.e. January 1 to December 31). As established in the Notice, applicants who wish to apply for an allocation under the beef and veal TRQ are invited to submit their fully-completed application form between October 1 and November 15 immediately preceding the opening of the quota year on January 1^st. Allocations are valid only for the year in which they have been granted.  

Relevant base period

Under the WTO beef and veal TRQ eligibility for an allocation, and the size of that allocation, will be assessed on the basis of each applicant’s processing and import activity in the beef and veal sector during the base period of October 1 to September 30 immediately preceding the allocation year.  Applicants must be active in the processing or import of beef and veal at the time of application and must remain active throughout the quota year for which they are seeking an allocation.