Global agricultural supply chain under tariff-rate quotas

The tariff rate quota (TRQ) is a widely utilized market access instrument in global agricultural trade that allows a predetermined quantity of a product to be imported at a lower tariff rate than the usual rate. This study examines the design and administration of TRQ systems from an operations management perspective and analyzes their impact on market access, fill-rates, and revenue for policy makers. We investigate the two most common TRQ administration methods, namely, licensing and first-come, first-served (FCFS) systems. We characterize the Nash equilibria of importers’ strategies and observe how information delays and lead times can result in under-utilization (i.e., imports being less than the quota limit) in licensing, and over-utilization (i.e., imports exceeding the quota limit) in FCFS TRQ systems. We introduce a dual TRQ system and demonstrate its superiority over licensing and FCFS systems. We study the effects of stock-keeping options through customs-bonded warehouses and the choice of logistics channels on arrival patterns and fill-rates. We conduct a case study of the UK and the EU imported beef market using customs data. Our numerical study provides an explanation for the sub-optimality of the current TRQ systems and proposes modifications to transform the existing systems. Our findings offer practical directions for agricultural traders to reassess their supply chain strategies by considering the logistical implications of TRQ systems and understanding their competition. This study also urges policy makers to adopt an integrative approach in (re)designing TRQ systems, recognizing the pivotal role of supply chains in global agricultural trade.

agricultural supply chains, global logistics, international trade, noncooperative game theory, tariff rate quotas

10.1111/poms.14054

1059-1478

3634-3649

Hezarkhani, Behzad

ae3fc227-94dc-47bd-b52c-2fdf90277bef

Arisian, Sobhan

070380fc-2908-4b56-a265-e54e18121d5a

Mansouri, Afshin

b560e111-91a9-4870-96c1-ace2562e7e3c

November 2023

Hezarkhani, Behzad

ae3fc227-94dc-47bd-b52c-2fdf90277bef

Arisian, Sobhan

070380fc-2908-4b56-a265-e54e18121d5a

Mansouri, Afshin

b560e111-91a9-4870-96c1-ace2562e7e3c

Hezarkhani, Behzad, Arisian, Sobhan and Mansouri, Afshin (2023) Global agricultural supply chain under tariff-rate quotas. Production and Operations Management, 32 (11), 3634-3649. (doi:10.1111/poms.14054).

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Accepted/In Press date: 9 July 2023

e-pub ahead of print date: 18 August 2023

Published date: November 2023

Additional Information: Funding Information: This research was supported by the joint funding of the Australia and New Zealand Academy of Management and the British Academy of Management. This research was also partially supported by a Social Research Platform Grant from La Trobe University. The authors appreciate the input provided by British Meat Processors Association, International Meat Trade Association, Meat & Livestock Australia, and Dr. Andrew Grainger, among others. The authors are grateful to the associate editor and two anonymous referees for suggestions that improved the paper. Funding Information: This research was supported by the joint funding of the Australia and New Zealand Academy of Management and the British Academy of Management. This research was also partially supported by a Social Research Platform Grant from La Trobe University. The authors appreciate the input provided by British Meat Processors Association, International Meat Trade Association, Meat & Livestock Australia, and Dr. Andrew Grainger, among others. The authors are grateful to the associate editor and two anonymous referees for suggestions that improved the paper. Publisher Copyright: © 2023 The Authors. Production and Operations Management published by Wiley Periodicals LLC on behalf of Production and Operations Management Society.

Keywords: agricultural supply chains, global logistics, international trade, noncooperative game theory, tariff rate quotas

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