Hi friends, in today’s article we are going to know about import quota and also know the different types of import quota. So let’s discuss in details.
Import Quota Definition
The import quota means the physical limitation imposed by the Government upon the quantities of different products to be imported from foreign countries within a specified period of time.
Usually one year. The import quota may be fixed either in terms of quantity or the value of the production. The Government of one country may adopt various alternative ways to restrict imports. The are –
- Issue of import licenses to the highest bide in the open market.
- Issue of import license by calling for the tenders from prospective importers, the highest tenderer getting the license.
- Issue of import license to same Government agency such as the state trading corporation, etc.
Objectives of Import Quota
The system of prescribing import quota is resorted to by the Government of a country for realizing the following objectives –
(i) To effort protection to domestic industries through restricting foreign competition by limiting import from abroad.
(ii) To make adjustment in the adverse balance of payment.
(iii) To conserve the scarce foreign exchange resources of the country and to direct their use for high priority import items.
(iv) To ensure the stabilization of the internal price level by properly regulating the import of goods from abroad.
(v) To discourage conspicuous consumption by the wealthy section through placing quota restrictions on the import of luxury goods.
(vi) To improve the international bargaining position.
(vii) To retaliate against the restrictive trade policies adopted by some of the foreign countries.
Types of Quota
• Tariff or custom Quota – In the case of tariff or custom quota, a certain specified quantity of a commodity is allowed to be imported by the Government of the importing country either duty free or at a law rate of import duty. The imports in excessed of that specified quantity are subject to a relatively higher rate of tariff.
• Unilateral Quota – Under the system of unilateral quota, a country places an absolutely limit upon the quantity of a commodity to be imported during specified period. This unilateral quota may be of two types-
(a) Global quota and
(b) Local quota.
Under Global quota the entire quantity to be imported from any one or more countries. Under the allocated quota system, the total quantity of import quota is allocated or distributed among different countries on the basis of certain criteria.
• Bilateral Quota – In case of the bilateral quota, the import quota is fixed after negotiations between the importing and exporting countries.
• Licensing – Under this quota system, the Government issue import license to specific importers. Only the license holder importers can import the goods.
So friends, this was the concept of quota. Hope you get the full details about it and hope you like this article.
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