An import quota is a type of
trade restriction that sets a physical limit on the quantity of a good that can be
imported into a country in a given period of time. An import embargo or import ban is essentially a zero-level import quota.
Quotas, like other trade restrictions, are typically used to benefit the producers of a good in that economy (
protectionism
Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations ...
).
Enforcement
Import quotas are usually implemented by awarding licenses to companies or individuals according to a specific catalogue of criteria, either free of charge, for a fee, or in the form of an auction. Importers without licences are not allowed to import at all,
or in certain cases, can import only for a very high tariff premium.
[See ] In the case of a quantity quota, imports are restricted directly for importers based on the imports of the previous year, for example by setting weights, quantities and dimensions, etc.
Quota share
The quota share is a specified number or percentage of the allotment as a whole quota, that is prescribed to each individual entity.
For example, the
United States
The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
imposes an import quota on cars from
Japan
Japan is an island country in East Asia. Located in the Pacific Ocean off the northeast coast of the Asia, Asian mainland, it is bordered on the west by the Sea of Japan and extends from the Sea of Okhotsk in the north to the East China Sea ...
. The Japanese government may see fit to impose a quota share program to determine the number of cars each Japanese car manufacturer may export to the United States. Any extra number that a manufacturer wishes to export must be negotiated with another manufacturer that did not or cannot maximize its share of the quota.
There are also quota share insurance programs, where the liability and the premiums are divided proportionally among the insurers. For example, three companies take out a $1,000,000 fire insurance policy on a quota share basis with company A assuming 50% ($500,000), company B 30% ($300,000), and company C 20% ($200,000). If the annual premium was $5,000, company A would receive $2,500 in premium, B would receive $1,500, and C would receive $1,000. Company A would pay 50% of any one claim, Company B would pay 30% of any one claim, and Company C would pay 20% of any one claim.
See also
*
Non-tariff barriers to trade
*
Production quota
A production quota is a goal for the Production (economics), production of a good (economics), good. It is typically set by a government or an organization, and can be applied to an individual worker, firm, industry or country. Quotas can be set ...
*
Tariff-rate quota
References
Quotas
Non-tariff barriers to trade
Import
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