General Information on the Administration of TRQs for Supply-Managed Products
Table of contents
- General information
- Applying for an allocation
- Eligibility criteria and activity tests
- Related persons
- Transfer, return and under-utilization
- Non-ICL products
1. General information
1.1 Definition of tariff rate quota (TRQ)
- A TRQ is a quota that establishes a limit on the quantity of a product that may be imported at a lower (within access) rate of duty, but places no limit on the amount of product that may be imported at a higher (over access) rate of duty.
- The within and over access rates of duty that apply to imports of products controlled under the Export and Import Permits Act (EIPA) can be found in the schedule to the Customs Tariff.
- If you are uncertain about the tariff classification of a particular product or whether it is subject to a TRQ, you may contact the Canada Border Services Agency (CBSA).
- For a list of Canada’s TRQs for supply-managed products, please see the list of Notices to Importers.
1.2 How a TRQ is administered
- Some TRQs are administered on a first-come, first-served basis, while others are administered by way of managed allocation.
- Regardless of how a TRQ is administered, you always need an import permit to import a product that is subject to a TRQ.
- Under the authority of the EIPA, only residents of Canada may obtain an import permit.
- Please note that shipment-specific import permits are normally not issued retroactively for shipments that have already been imported into Canada, including under the authority of a General Import Permit (GIP), regardless of the importer’s TRQ allocation.
- For information about how a specific TRQ is administered, please review the relevant Notice to Importers.
- For information about the TRQ application period opening and closing dates, reference periods and the annual access quantities for each TRQ, see the key dates and access quantities.
1.3 How an allocation works
- An allocation is an amount of TRQ that is granted to an eligible applicant, and it functions like an account:
- Assume, for example, that you are an allocation holder who has been granted an allocation of 100,000 kilograms under a cheese TRQ;
- To use your allocation, you need to request shipment-specific import permit(s);
- You may import the entire 100,000 kilograms under one permit, or you may draw down on your allocation gradually by importing the 100,000 kilograms of cheese in smaller quantities over the allocation year. You would need to request a permit for each shipment of cheese that you import.
- All allocations expire at the end of the TRQ year - you cannot carry an allocation over from one year to another.
- There are no property rights attached to an import allocation - under the EIPA, the Minister may amend, suspend, cancel or reinstate any permit, import allocation or other authorization issued or granted under the EIPA.
1.4 Validity period of an allocation
- An allocation is valid only for the TRQ year for which it was issued.
- You must submit an application on an annual basis and demonstrate that you are eligible for an allocation each TRQ year.
- Normally, if you have not applied one year you may still submit an application in subsequent years.
- Traditional allocation holders must re-apply each year to retain the ability to qualify for a traditional allocation.
1.5 Importing a product without an allocation
- If you have used up your allocation or did not receive an allocation, you can import eligible agricultural goods under the authority of a GIP 100.
- Products imported under a GIP 100 are subject to the applicable over-access duties.
- It is an offence under the EIPA to import products that are on the Import Control List (ICL) without the authority of a shipment-specific import permit or a GIP.
2. Applying for an allocation
2.1 How to apply for an allocation
- Step 1: Review the Notice to Importers, including the policy on related persons, to see if you are eligible for an allocation.
- Note: Each TRQ is administered independently in accordance with the applicable policies. You may apply for an allocation under multiple TRQs, but you must submit a separate application for each TRQ and demonstrate that you meet the applicable eligibility criteria and activity tests.
- Step 2: Familiarize yourself with the key dates for the TRQ of interest to ensure that you submit your application on time.
- Step 3: Complete the application form.
- Ensure that you attach any required supporting documentation.
- Incomplete applications will be returned without action.
- Note: If you do not have an EIPA file number, you can obtain one by submitting an Application for an EIPA File Number form.
- Although you can submit an application without an EIPA file number, it is highly recommended that you obtain one in advance.
- EIPA file numbers are also required to apply for a shipment-specific import permit.
- Step 4: Submit your completed application.
- Please submit your application by email to the relevant email address.
- We do not accept applications submitted via facsimile nor by mail.
- Note: It is important that you provide complete, accurate and truthful information in your application. This information will be considered to determine your eligibility for an allocation and the amount for which you may qualify.
2.2 Demonstrating activity regularly during the reference period and throughout / during the TRQ year
- This is normally understood to mean that you are able to demonstrate activity in the relevant Canadian sector on a monthly basis.
- The type of activity that you must demonstrate depends on the TRQ under which you are applying.
- Demonstrating activity does not normally mean demonstrating a history of importing the products unless you are a traditional quota holder applying for a traditional allocation.
- To see the activity tests that apply to the TRQ under which you wish to apply, please review the relevant Notice to Importers.
2.3 Additional documents required to support your application
- You may be asked to provide documents including, but not limited to, purchase and sales invoices, proofs of payment to your suppliers or from your customers, recipes, advance tariff classification rulings or letters of opinion from the CBSA, production reports, customer information, product specifications and laboratory analyses.
- Failure to provide the information or documents requested may result in your application being deemed incomplete or ineligible.
- You are responsible for all costs associated with requests for additional information, including third party audits.
2.4 Communication of allocation decisions
- You will be informed in writing whether you have qualified for an allocation and the amount of quota you have been allocated.
2.5. Distributor to distributor sales
- Sales to other distributors normally cannot be included in a distributor applicant’s total sales. This ensures that these sales are not used by multiple distributors to qualify for an allocation.
- Some TRQs allow distributors to include sales to other types of businesses.
- Information regarding which sales should be included in your application can be found in the relevant Notice to Importers.
3. Eligibility criteria and activity tests
3.1 Purpose of eligibility criteria
- Used to determine who is eligible to obtain an allocation under a TRQ or a permit to import products that are on the ICL.
- For example, in the case of poultry products, you may be required to demonstrate that you are a distributor, processor or food service provider.
- Eligibility criteria are further defined by activity tests.
- Depending on the TRQ, sales to related parties cannot be included in an applicant’s total sales (this ensures these sales are not used by related parties to qualify for an allocation).
- Information regarding which sales should be included in your total sales can be found in the relevant Notices to Importers or associated application forms.
3.2 Purpose of activity tests
- Activity tests add further definition to eligibility criteria and help to measure an applicant’s level of activity in the industry.
- The Minister’s policies state that you must be able to demonstrate that you were active in the applicable Canadian sector, as stated in the relevant Notice to Importers, in a defined 12-month reference period.
- For example, you may have to demonstrate that you have manufactured, purchased or sold a certain minimum quantity of products in the reference period in order to be considered eligible for an allocation.
- If the TRQ for which you are applying is allocated on a market share basis, your level of activity in the industry, as compared with the level of activity of other alike eligible applicants in the reference period, will be used to determine the size of your allocation.
3.3 Definition of market share
- Market share means an allocation method that apportions a TRQ on the basis of an applicant’s level of activity in the reference period in proportion to the activity levels of other alike eligible applicants.
3.4 Definition of equal share
- Equal share means every eligible applicant gets the same amount of quota.
3.5 Residency requirements to obtain an allocation
- To receive an import allocation, you must be a resident of Canada.
3.6 Applying for more than one allocation in a TRQ
- Depending on the TRQ, you may or may not be able to apply under more than one portion of the TRQ.
- For example, under the World Trade Organization (WTO) chicken TRQ, you may be eligible to apply for an allocation under both the processor portion and the further processor portion; but under the Comprehensive Economic and Trade Agreement (CETA) cheese TRQ, this is not possible.
- For details on whether or not you can apply for more than one allocation within a single TRQ, please review the policy stated in the relevant Notice to Importers.
4. Related persons
4.1 Information on related persons
- The criteria for determining whether individuals or companies applying for an allocation are related are set out in the Information concerning related persons.
- If you are uncertain whether you are related, you should list the individuals or companies to whom you may be related and seek an assessment from the Department.
4.2 Submission of applications by related persons
- Before applying for an allocation, check the Notice to Importers to see if there are any restrictions on related persons.
- Related persons are normally eligible for only one allocation under a given TRQ.
- In the case of separate applications from related applicants involving a parent company and one or more subsidiaries, only the application nominated by the parent company is considered by the Department.
- If the parent company does not make such a nomination in writing, the Department makes the choice.
- In the case of the CETA cheese TRQs, if you are related to an allocation holder under the WTO Cheese TRQ you should check the Notice to Importers regarding the new entrants policy.
5. Transfer, return and under-utilization
- Under many TRQs, you may transfer any portion of your allocation to other allocation holders within the same TRQ, but there may be some restrictions depending on the TRQ.
- As each TRQ is administered independently, quota is not transferable between different TRQs.
- All quota transfers must be referred to the Department for consideration by way of a Transfer Request Form.
- Under many TRQs, you may return a portion of your unused allocation without penalty as long as you notify the Department in writing no later than the applicable return date.
5.3 Application of minimum utilization rates
- The minimum utilization rate is a mechanism to encourage maximum use of a TRQ.
- If you do not reach the predetermined minimum level of utilization, you may be subject to an under-utilization penalty if you apply for an allocation the following year.
- The applicable minimum utilization rate for each TRQ is set out in the Notice to Importers.
- You will be advised of any under-utilization penalty that applies to you before the allocations are finalized for the new allocation year.
5.4 Calculation of the under-utilization penalty
Note: kg was chosen as a measure of unit for the example below, however, depending on the TRQ the respective unit of measure is applicable (for example, for broiler hatching eggs and chicks, the unit of measure would be dozens (dz)).
- Step 1: We calculate the allocation holder’s utilization rate (%) as follows:
|Elements of Utilization Rate Calculation||Definitions|
|Utilization Rate (%)||(Level of Use (kg) / Allocation Granted (kg)) X 100%|
|Level of Use (kg)||Permits Used (kg) + Returns (kg) + Transfers Out (kg)|
|Allocation Granted (kg)||Initial Allocation (kg) + Transfers In (kg) + Reallocation of returns (kg)|
- Step 2: If the allocation holder has not met the minimum utilization rate for that TRQ, we calculate the under-utilization penalty as follows:
|Elements of Under-utilization Calculation||Definitions|
|Under-utilization Penalty (kg)||Pre-penalty Allocation (kg) X Under-utilization Rate (%)|
|Pre-penalty Allocation (kg)||Allocation that the allocation holder would have been eligible for in the new quota year, if the allocation holder had not under-utilized in the previous quota year|
|Under-utilization Rate (%)||100% - Utilization Rate (%)|
- In the year 2100, Company A received an initial allocation of 1000 kilograms in a TRQ where the minimum utilization rate to avoid an under-utilization penalty is 90%.
|Company A TRQ Activities for 2100||Remaining Quantities|
|Initial allocation for Company A||1,000 kg|
|Accepted a transfer of 200 kg from Company B||1,000 + 200 = 1,200 kg|
|Transferred 50 kg to Company C||1,200 – 50 = 1,150 kg|
|Returned 50 kg||1,150 – 50 = 1,100 kg|
|Used permits for a total of 900 kg||1,100 – 900 = 200 kg|
|Level of Use (Permits Used (kg) + Returns (kg) + Transfers Out (kg))||900+50+50 = 1,000 kg|
|Allocation Granted (Initial Allocation (kg) + Transfers In (kg)||1,000 + 200 = 1,200 kg|
|Utilization Rate (%) = (Level of Use (kg) / Allocation Granted (kg)) X 100%||1,000/1,200 X 100% = 83.33%|
|Unutilized TRQ at the end of 2100||200 kg of 1,200 kg = 16.67%|
- This means that Company A had a total utilization rate of 83.33% in the year 2100.
- In 2101, Company A applies for an allocation under the same TRQ and, based on the criteria set out in the policy, would be eligible for an allocation of 1,500 kg. However, because Company A utilized only 83.33% of its allocation in 2100, the company’s allocation for 2101 is reduced by 250 kg (i.e., 16.67%). As such, Company A’s initial allocation in 2101 is 1,250 kg.
|How the Under-utilization Penalty is Applied in 2101|
|Quantity Company A is eligible for in 2101||1,500 kg|
|2101 allocation once under-utilization penalty is applied||1,500 kg – 250kg = 1250 kg|
|Actual 2101 allocation||1,250 kg|
6. Non-ICL products
6.1 Description of Non-ICL products
- Non-ICL products are products that are not on the ICL, and that are domestically manufactured to compete with similar imported products entering Canada duty-free or at a low rate of duty.
- Non-ICL products include “specially defined mixtures” (SDMs) of chicken or turkey products classified under tariff codes 1602.31.11, 1602.31.92, 1602.32.11 and 1602.32.92 of the Customs Tariff.
- Chicken or turkey products are also considered as non-ICL products if they are classified under the following tariff codes:
- 19.02 – Pasta;
- 19.04 – Rice preparations;
- 19.05 – Pastry;
- 20.04 – Other vegetables prepared or preserved, frozen;
- 20.05 – Other vegetables prepared or preserved, not frozen;
- 20.06 – Fruits and vegetables preserved by sugar;
- 21.03 – Sauces and preparations;
- 21.04 – Soups;
- 21.06 – Food preparations.
Examples of Non-ICL products
- Examples of non-ICL products include: chicken cordon bleu, breaded breast of chicken cordon bleu, chicken Kiev, breaded breast of chicken Kiev, boneless Rock Cornish hen with rice, stuffed Rock Cornish hen, boneless chicken with apples and almonds, chicken Romanoff Regell, chicken Neptune breast, boneless chicken Panache and chicken TV dinners.
SDM definition before CUSMA coming into force (July 1, 2020):
- Under NAFTA, SDMs are defined as chicken or turkey or a product containing chicken or turkey, wherein 13% or more of the total weight of the product is comprised of goods other than the following: chicken, turkey, bread or breading, batter, oil, glazing, other coatings and bastes, and any added water (including that used in marination, glazing, other coatings, bastes, breading and batter).
New SDM definition after CUSMA coming into force:
- The new SDM definition will be what is used under the WTO. It has a cooking requirement by which goods will have to be partially or fully cooked, including par-fried, and will also change what can be considered as part of the 13% “other goods”, for example, sauces are now excluded from the calculation.
- The new SDM definition is below:
- SDMs of tariff items 1602.31.11, 1602.31.92, 1602.32.11 and 1602.32.92 means a product containing partially or fully cooked, including par-fried, chicken or turkey where 13% or more of the total weight of the product is comprised of goods other than the following listed goods: chicken, turkey, breading, batter, oil, glazing, sauces, other coatings, or bastes, or any added water (including that used in marination, glazing, sauces, other coatings, bastes, breading or batter). For the purposes of this definition, whether 13% or more of the total weight of the product is comprised of goods other than the listed goods shall be determined by calculating the total weight of listed goods contained in that product as a percentage of the total weight of the product.
- CBSA has created a new email address that companies must now use for inquiries such as requests for opinion letters for new non-ICL products at: CBSA.SDM-MDS.ASFC@cbsa-asfc.gc.ca.
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