International-Business-Dr-R-Chandran-E-book

Types of non-tariff barriers
195
International Business- Dr. R. Chandran
1. Quota system: The quota system is an important non-tariff barrier. Under
this system, the quantity of a commodity permitted to be imported from
various countries during a given period is fixed in advance. Such quotas
are usually administered by requiring importers to have licenses to import
a particular commodity. Imports are not allowed over and above a
specific limit. This suggests that tariffs restrict imports indirectly while
quotas restrict imports directly. Developing countries may use quotas in
place of tariffs. The quota system acts as a barrier to international trade as
it restricts the flow of goods in an artificial manner. There are different
types of quota and a country can introduce any type of quota as per the
need of the situation.
The types of quotas are:
Tariff quota: A tariff quota combines the features of the tariff as well as
the quantity. Here, the imports of a commodity up to a specified volume
are allowed duty free or at a special low rate of duty. Imports in excess of
this limit are subject to a higher rate of duty.
Unilateral quota: In a unilateral quota system, a country fixes its own
ceiling on the import of a particular item.
Bilateral quota: In a bilateral quota, the quantity to be imported is
decided in advance, but it is the result of negotiations between the
country importing the goods and the country exporting them.
Mixing quota: Under a mixing quota, the producers are obliged to utilise
a certain percentage of domestic raw material in manufacturing the
finished products.
2. Import Licensing: Import licensing is an alternative to the quota system.
It is useful for restricting the total quantity to be imported. In this system,
imports are allowed under license. Importers have to approach the
licensing authorities for permission to import certain commodities.
Foreign exchange for imports is provided against the license. Such
import licenses are the practice in many countries. This method is used to
control the quantity of imports. Import licensing may be used separately
or along with the quota system.
3. Consular formalities: Some importing countries impose strict rules
regarding the consular documents necessary to import goods. Such
documents include import certificate, certificates of origin and certified
consular invoices. Penalties are imposed for non-compliance of such
documentation formalities. The purpose of consular formalities to restrict
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