Special Report- February 2001
The U.S. Domestic Peanut Program and the Tariff Rate Quota (TRQ)
Though support for peanut production has been around since the 1930's, the current domestic peanut program dates back to legislation passed in 1977 which established a two-price poundage quota for peanuts. Further refinements in succeeding farm legislation eliminated acreage allotments, reduced domestic poundage quotas, and opened production of export peanuts, known as additionals, to non-quota holders. Under the current peanut program, quota peanuts receive an average of $610 per short ton ($672/mt). The total national quota is determined each year and is equal to the estimated quantity of peanuts devoted to domestic edible consumption, planting seed, and related uses. For 2000, the domestic quota was set at 1.18 million short tons (1.07 mt). Price supports are also provided for the production of additionals though is set at a level that assures no net cost to the government.
To protect the domestic peanut price support program, peanut imports were limited to 1.71 million pounds shelled basis (775 mt) beginning in 1953 with provisions to increase this amount when domestic shortfalls occurred. During the last GATT negotiations, the U.S. agreed to expand the level of peanut imports using a tariff rate quota (TRQ). Beginning in 1995, TRQs for peanuts and peanut butter/paste were started. The TRQ operates by setting a relatively low tariff on imports up to a specified quantity. Amounts greater than this are assessed a much higher duty which effectively limits the amount of imported peanuts and peanut butter/paste entering the U.S.
Under the current TRQ, 53,000 tons (shelled basis) of peanuts are allowed to enter the U.S. at reduced duty (9.35 cents/kg shelled bases) while amounts in excess of this figure are assessed an ad valorem duty of 163.8% . Inshell and prepared/preserved peanuts are assessed a duty of 6.6 cents/kg under the quota and 131.8 percent ad valorem duty in excess of the quota. Argentina, as the principle force behind the initiation of the TRQ is allotted 83 percent of the quota (43,901 tons) while the remainder is open to all other countries not having a specific quota allotment (9,005 tons). This quota covers the period from April 1 to March 31. The peanut butter/paste quota totals 20,000 tons of which 72 percent is assigned to Canada (14,500 tons) and 18 percent to Argentina (3,650 tons). GSP (General System of Preferences) beneficiary countries are allotted 1,600 tons while all other countries not allotted a specific quota are limited to a combined 250 tons. Amounts imported above the quota are charged an ad valorem duty of 131.8 percent while amounts within the quota enter duty-free. The quota is applied on a calendar year basis.
Both Canada and Mexico fall under the jurisdiction of NAFTA and as such are allowed duty free access to the U.S. market Duty free imports of Mexican peanuts are limited to 4,153 tons in 2001 (calendar year basis) after which the 163.8% ad valorem duty is assessed. This figure is set to rise to nearly 4,959 tons in 2007. Beginning in 2008, there will be no limit on duty-free imports. Peanut butter/paste imports from Mexico are allowed duty free access to the U.S. market without limits as long as the product is made using Mexican grown peanuts. Israel, under its free trade agreement with the U.S. is allocated a small 116 ton quota which enters duty-free.