About TRQ or tariff rate Quota
TRQ or tariff rate Quota is the quota that specifies the volume which will have a comparatively low tariff import duty. For crude soya oil, the TRQ is 30,000 tonne. This means that if more than 30000 crude oil is imported to India from Paraguay then the additional volume will be charged with the customs duty of higher tariff. As per the India MERCOSUR agreement, a concession of 10% on custom duty was granted.
TRQ quota for import of 30,000 MT of crude soya oil from Paraguay
Soya bean oil has many usages, it is one of the most used cooking oil in India and is also used in some printers ink as well as in paints. It is also used as a fixative in insect repellent. it is made with the crude soya oil. The crude Soya oil is imported from Paraguay under the Preferential Trade Agreement between India and MERCOSUR. The TRQ for crude soya oil is 30,000 MT.
The TRQ (Tariff Rate Quota) is a regime that combines tariff and import quota to regulate imports. The quota here implies that to a certain specified quantity a lower tariff rate will be imposed on products being imported; if the quantity exceeds the quota then higher tariff will be applied on the additional quantity of the imported products. For example, if the quota of crude Soya oil is 30,000 MT and the concession given on the tariff of the quota is 10%, then any oil imported which is more than the quota will be charged a tariff higher than the quota.
TRQ regime does not restrict the number of imported goods. However, out-of-quota goods will be charged a higher tariff then the in-quota-commitment goods. Also, if the in-quota-goods do not conform to the requirement mentioned in the agreement then lower tariff will not apply.
Another important feature of TRQ is that by restricting the import, it protects domestic production. If certain imported product crosses the threshold of TRQ then prohibitive out-of-quota tariff rate will be applied to them.
Crude Soya Oil from Paraguay was imported to India. India is under a trade agreement with Paraguay and therefore has received a 30,000 tonne of crude soya oil at a 10% concessional rate on custom duty as agreed in the deal.
MERCOSUR Preferential Trade Agreement (PTA)
MERCOSUR came into existence in 1991. The Functions of MERCOSUR have been amended and updated from time to time. Currently, it is confined to common trade policy and free intra-zone trade. the official languages used in MERCUSOR are Portuguese, Spanish, Guarani. Montevideo is the first lifting headquarters in 2001.
- Trading bloc in Latin America known as COSUR is made of Argentina, Brazil, Paraguay, and Uruguay. MERCOSUR aims to facilitate the unobstructed movement of capital, services, goods, and people (of this group) from one country to another. Among the North American Free Trade Agreement (NAFTA) European Union (EU), MERCOSUR ranks third.
- MERCOSUR signed a Framework Agreement with India on June 17th, 2003 at Asuncion in Paraguay. The agreement was made to create mechanisms for negotiations and conditions in the first stage, to provide reciprocal tariff relief in the Second Stage, and negotiations for free trade area between India and MERCOSUR that conforms with the World Trade Organisations (WTO) rules.
- on January 25th, 2004 in Delhi, Preferential Trade Agreement was signed after finalizing the Framework Agreement. This PTA aims at strengthening the existing trade relations as well as expand it to the extent of creating a free business area between parties and reciprocate the tariff concessions.
- According to the Preferential Trade Agreement between India and MERCOSUR, five Annexes are provided for. These Annexes were finalized during the 6 round conference to make the PTA operational. G-20 meeting was concluded in New Delhi on 19th March 2005, immediately after which the Agreement was signed.
The Five Annexes are as follows;
- Annex 1 to the PTA- it contains 452 products. It deals with tariff concession for MERCOSUR on Indian Products.
- Annex 2 to PTA- it contains 450 products. It deals with the tariff concessions for India on MERCOSUR products.
- Annex 3 to the PTA- it deals with the Rules of Origin
- Annex 4 to the PTA- it deals with Safeguard Measures
- Annex 5 to the PTA- it deals with the Dispute Settlement Procedure (DSP)
- The main attractions of the Indian Offer list are inorganic and organic chemicals, meat products and meat, pigments and dyes, skins and rawhides, wool, leather articles, cotton, glassware, and glass, yarn, steel and iron articles, electrical equipments and machinery, optical, cinematographic and photographic apparatus, machinery items.
- The main attractions of MERCOSUR offer list are organic chemicals, food preparations, essential oils, pharmaceuticals, articles of plastics and plastics, rubber products and rubber, implements and tools, electric equipment and machinery and machinery items.
In spite of agreement being signed in 2005, the India –MERCOSUR PTA came into effect from June 1st,2009.
The bilateral trade of India with MERCOSUR was $10 billion in 2015-16 which was lesser than $14.24 billion in 2014-15.
In 2012, MERCOSUR suspended Paraguay from the bloc and in July 2013 the MERCOSUR COUNTRIES Presidents decided to re-instate Paraguay after Horacio Cartes, newly elected President takes Oath. However, Paraguay refused to become a member of MERCOSUR as long as Venezuela has a rotating presidency which will end in 2014. According to Paraguay the addition of Venezuela is not unanimous which makes the addition of Venezuela obstruction of the treaty, as Paraguay was suspended. Foreign Minister of Paraguay stated that their priority is not MERCOSUR but the bilateral relationship with neighboring countries as they have pending issues have with Uruguay and Argentina.
Venezuela and MERCOSUR conflict
2016 brought out the Venezuelan controversy where the Presidents of Argentina, Brazil, and Paraguay decided to suspend Venezuela from MERCOSUR for violating the requirements of Union(human rights included) for full membership. This prompted a dispute for the entire year.
The suspension of Venezuela from the MERCOSUR was announced on November 21st, 2016 by Eladio Loizaga, Paraguayan foreign minister. Before the suspension, a three- month trial period was granted to Venezuela to reform themselves and conform to the laws of the MERCOSUR relating to human rights, politics, trade, and democracy. 1st December 2016 marked the suspension of Venezuela from MERCOSUR.