Understanding the basics of Canada’s Tariff Rate Quota (TRQ) system

The duty rate you pay isn’t always fixed, and, in many cases, it depends on how much of your product has already entered the country.

This system is known as a Tariff Rate Quota (TRQ).

In this article, we introduce the fundamentals of Canadian TRQs and outline what you need to consider before you ship your goods.

What is a Tariff Rate Quota?

A Tariff Rate Quota (TRQ) is a trade measure that allows a certain quantity of a product to enter Canada at a lower tariff rate.

Once that quantity, known as the quota, is reached, any additional imports of the same product face a higher tariff rate for the rest of the quota period.

When applicable, TRQs create two different duty levels for the same goods. One for shipments within the quota (in-quota) and another for those that exceed it (over-quota).

Which goods are subject to TRQs?

In Canada, Tariff Rate Quotas mainly apply to supply-managed agricultural products and certain goods covered under free trade agreements. 

Common goods subject to TRQs include:

• Dairy products
• Margarine
• Poultry
• Eggs
• Beef and veal
• Grains
• Processed Foods
• FTA-specific allocations

While most TRQs apply to agricultural goods, Canada also uses quotas in other sectors.

These include TRQs on certain steel and aluminum products and Tariff Preference Levels (TPLs) for textiles and apparel under some free trade agreements.

Because TRQs are tariff-classification-specific, not all products within a category are treated the same way.

A customs broker can help you confirm classification and whether a quota is available for your goods.

How the TRQ system works

TRQs operate on an annual cycle.

However, not all TRQ cycles follow a calendar year (January to December).

Global Affairs Canada (GAC) is responsible for administering most of Canada’s TRQs, under the authority of the Export and Import Permits Act (EIPA).

For many quota-controlled goods, GAC issues specific import permits. These permits determine whether a shipment is treated at the lower in-quota tariff rate or the higher over-quota rate.

Quotas can either be allocated to specific importers or provided on a first-come, first-served basis.

Because they can fill up quickly, it’s best to confirm quota availability with your customs broker before shipping.

Applying for a TRQ allocation

If the TRQ is allocated, you must apply for a share of the quota and demonstrate that you meet certain eligibility criteria.

Each TRQ is administered independently, so a separate application is usually required for each quota.

GAC may inspect any applicant to verify compliance with the EIPA, and allocation decisions are communicated in writing once the review process is complete.

Sometimes, you might need to provide additional documentation to confirm your eligibility. In such cases, GAC might ask for:

• Purchase or sales invoices
• Proof of payment
• Product recipes or formulations
• Tariff classification rulings or CBSA letters of opinion
• Production or processing reports
• Customer information or contracts
• Product specifications
• Laboratory analyses

The transfer, return, and under-utilization of TRQs

There are specific rules that govern how allocations may be transferred or returned, and how under-utilization may affect future quota eligibility.

Transfer of allocations

Under many TRQs, allocation holders may transfer part or all of their allocation to other allocation holders within the same TRQ, provided that a formal Transfer Request Form is submitted to GAC.

However, transfers cannot happen between different TRQs.

Return of unused allocations

Many TRQs allow allocation holders to return unused portions of their quota without penalty, as long as the return is submitted in writing by the specified deadline.

Returned volumes may later be redistributed to other eligible applicants who can use them.

Under-utilization rules

Each TRQ has a predetermined utilization rate.  

Allocation holders who do not meet this threshold, and do not return the unused portion by the deadline, may face a reduced allocation in the following year.

TRQs and free trade agreements

Many of Canada’s free trade agreements include TRQs that set specific volumes of goods eligible for lower in-quota tariff rates.

Even if a product qualifies for preferential treatment under an FTA, that rate may apply only when in-quota volume is available.  

If the quota is already filled or if you do not hold the required permit, your shipment may be subject to the higher over-quota rate (often the MFN rate), regardless of the agreement in place.

How Cole International can help

At Cole International, we offer trade consulting and customs brokerage services to help Canadian businesses determine if and how quotas may apply to their shipments. 

Our team works with importers every day to:

• Review product details and confirm whether TRQs apply
• Verify quota availability and identify the correct in-quota or over-quota tariff rate
• Determine whether a special import permit is required for the shipment
• Identify potential compliance risks that could affect duty rates

We don’t believe in guesswork. We get it right the first time.

Reach out to one of our trade professionals if you’re unsure whether your goods fall under a TRQ, or if you need help confirming quota availability and requesting a permit.